A little about insiders/10% stock owners and such...
Who Is An Insider?
An insider is an officer, director, person with a policy-making role, or beneficial owner (holder of 10%
or more) of a company's stock. Insiders are both individuals and corporations, and are required to report
their:
Direct Holdings - holdings that are held in the name of the insider; and
Indirect Holdings - holdings that are controlled by the insider, yet are held by another entity
such as a family member, a trust, a company plan, or even a corporation to which the insider is
affiliated. In many cases, the same block of indirect stock may be claimed by several insiders,
such as a group of trustees over the same trust, or several partners in the same partnership.
Some insiders hold all of their stock indirectly.
Form 3: Initial Statement of Ownership
This form is filed only once by an insider, for each company that the insider is affiliated with. It is
usually filed within ten (10) days of the company going public, and/or within 10 days of an insider being
appointed an executive officer or director, even if the insider may not have acquired security holdings at
that time.
Additionally, the Form 3 is filed for anyone attaining a 10% or more holding of the outstanding shares of
a security under the Securities Act of 1934. For example, a 5%-or-more owner, upon attaining the 10%
level of ownership, would be required to file a Form 3 and then a Form 4 to reflect any changes in
ownership.
Form 4: Statement of Changes in Beneficial Ownership
The Form 4 is required any time there is an open market purchase, sale, or an exercise of options. It
must be filed by the 10th of the month following the transaction and contains the details of all
non-exempt transactions which exceed $10,000 during that month. Exempt transactions, such as gifts of
stock, may be filed on the Form 4 or on the annual Form 5.
Information included on this filing is the name of the insider, title, type of transaction, date of the
transaction, amount of stock acquired or disposed, price, holdings after the transaction, and the nature
of ownership.
On the Form 4 or Form 5 an insider indicates when he has retired or exited from the company by
checking the ''exit'' box on the filing. Once an insider retires/exits, he is required to report his
transactions for only the next six (6) months.
Form 5: Annual Statement of Changes in Beneficial Ownership
This form is required to be filed annually for those insiders who have had exempt transactions and had
not reported them previously on a Form 4. It must be filed within 45 days after the close of the issuer's
fiscal year to disclose transactions exempt from prior reporting, as well as transactions that should have
been reported previously, but were not. A Form 5 is not necessary if there have not been any
transactions to report.
Insiders may also note on Form 5 if they have retired or exited from the company by simply checking
the ''exit'' box on the filing. Once an insider retires/exits, he is required to report his transactions for
only the next six (6) months. |
