Form 4 is the SEC filing that company officers, directors, and owners of more than 10% of a class of stock must submit within two business days of buying, selling, or otherwise acquiring or disposing of their company's shares. Each line of a Form 4 carries a one-letter transaction code, such as P for an open-market purchase or S for a sale, that tells you what kind of transaction took place.
Who has to file
Section 16 of the Securities Exchange Act of 1934 requires these "insiders" to file:
- Officers of the company
- Directors of the company
- Beneficial owners of more than 10% of any class of the company's registered equity securities
The filing deadline
A Form 4 is due within two business days of the transaction date. This is far faster than other ownership-related filings and is meant to put insider trades in public view while they are still fresh.
Common transaction codes
| Code | Meaning |
|---|---|
| P | Open market or private purchase of securities |
| S | Open market or private sale of securities |
| A | Grant, award, or other acquisition of securities from the company (not an open-market trade) |
| M | Exercise or conversion of a derivative security (such as a stock option) exempt under Rule 16b-3 |
| F | Shares delivered or withheld to pay an exercise price or tax liability on vesting or exercise |
| G | Bona fide gift of securities |
Other codes exist for less common events, such as X for exercising an in-the-money or at-the-money option outside the Rule 16b-3 exemption, or C for conversion of a derivative security.
Limits of this data
Form 4 only covers officers, directors, and 10%-plus owners, so it misses trading by other employees or large non-insider shareholders. A code like A or M often reflects routine compensation, such as a scheduled option exercise or a stock grant vesting, rather than a discretionary bet on the stock, and F is frequently just tax withholding, not a sale decision. The form also does not explain why a trade was made, and many insider sales are pre-scheduled under 10b5-1 trading plans set up months in advance.
Frequently Asked Questions
Who has to file a Form 4?
Officers, directors, and owners of more than 10% of a company's stock, under Section 16 of the Securities Exchange Act.
How fast does a Form 4 have to be filed?
Within two business days of the transaction.
What does transaction code P mean?
An open market or private purchase of the company's stock.
Does a Form 4 sale always mean the insider thinks the stock will fall?
Not necessarily. Many sales are routine, prescheduled under a 10b5-1 trading plan, or simply shares withheld to cover taxes on vesting (code F), rather than a timing decision on the stock.
What is the difference between code A and code P?
Code A covers grants or awards from the company, such as compensation-related stock; code P covers an actual purchase on the open market or in a private transaction.
On Valence
Form 4 insider transactions, including transaction codes and filer roles, are tracked on the insider tracker page (/insider-tracker). This feature requires a free or Pro account.
This article is general information, not investment advice.
