Form 4

Form 4 is the statement of changes in beneficial ownership that officers, directors and more-than-10% holders must file with the SEC when they buy, sell or otherwise change their holdings of a company's equity. Most transactions must be reported before the end of the second business day after the trade.

How it works

Form 4 has two tables. Table I covers common stock; Table II covers derivatives such as options, warrants and convertible securities. Each line carries a transaction code. The ones traders watch most:

Footnotes explain the details, including whether a sale was made under a Rule 10b5-1 trading plan. Since 2023 the form has a checkbox for trades under such plans.

Why it matters for traders

Code P is the signal most investors look for: an insider spending personal cash on shares at market prices. Insider buying by several insiders in a short window (a "cluster buy") tends to draw more attention than a single purchase. Sales are noisier, since insiders sell for taxes, diversification and pre-scheduled plans. Codes A, M and F are usually compensation mechanics and carry little information.

Check the size relative to the insider's existing stake and salary, the price paid, and whether the trade came soon after an earnings release, when trading windows typically open.

Example

The CEO of Harbor Freightline (ticker HRBF) buys 40,000 shares at $12.50 on Monday, a $500,000 purchase. The Form 4 is due by Wednesday. It shows code P, a price of $12.50 and holdings after the trade of 640,000 shares, meaning the purchase raised her stake by about 6.7%.

FAQ

How long do insiders have to file a Form 4?

Generally two business days after the transaction. Certain small or exempt transactions can be deferred to Form 5.

Does every Form 4 mean an insider bought or sold on the market?

No. Many Form 4s report grants, option exercises, tax withholding or gifts. Look at the transaction code.