Day Trading Encyclopedia

SEC Filings Form 4

Form 4

What it is

After filing a Form 144, if the seller proceeds to sell shares, then they must file a Form 4 with the SEC documenting the number of shares sold and the price range. All directors and officers as well as shareholders that own more than 10% of the outstanding shares must file a Form 144 by the 10th of the following month following the trade. Form 4 applies not only to insider selling but also insider buying.

How to Read a Form 4

The Form 4 filing report discloses the insider’s name, relation to the company, date of the transaction, type of transaction (buy or sell), number of shares and the share price at the time of the transaction. It also discloses how many shares the seller has remaining after the transaction.

Things to Look Out For

Since the 10th of the month is the deadline for Form 4 filings, a good bulk of insider trading data hits the market at that time. It is a good idea to prepare for price action on stocks that are indicating insider buying. Insider buying almost always creates a surge in share price, at least initially. Insider selling can be attributed to many factors including a pre-arranged selling arrangement for tax purposes, compensation, retirement, personal issues or any number of reasons that may not be a harbinger to negative company events. If a series of insiders are actively selling large blocks, it could indicate a more serious issue. However, each instance should be analyzed on a case-by-case basis and not generalized.