Form 4 is the SEC’s statement of changes in beneficial ownership, and it is how the public sees insiders trade. A company’s directors, officers and 10% owners file one, ticking which of those they are in a relationship box. The form’s instructions set the deadline at the end of the second business day after the transaction, faster than an 8-K’s four. A filer reports each company on its own form.
Each line is one transaction in one security. It gives the date, a one-letter code, the shares, whether they were acquired or disposed of, the price, the filer’s holding afterward and whether it is held directly or indirectly. Shares go in Table I and options in Table II. Read the code first, because it says what kind of event the line is.
The instructions list 20 codes. These six do most of the work.
- P and S. An open-market or private purchase, and an open-market or private sale. These are the lines where an insider put money in or took money out at a price. Both codes include private deals, so “open market” is shorthand and not the form’s own phrase.
- A. A grant, award or other acquisition under Rule 16b-3(d). The company handed over the shares as pay.
- F. Payment of an exercise price or a tax bill by delivering shares back or letting the company withhold them, when an award vests or an option is exercised. The shares leave the filer, but no buyer in a market took them.
- M. The exercise or conversion of a derivative, such as an option becoming shares. The option leaves Table II and the shares arrive in Table I. Only the form of the holding changes.
- G. A bona fide gift. The SEC’s 2022 rule changes put all gifts on Form 4.
A, F and M are not open-market trades. A grant and the tax withheld on it say nothing about what the filer thinks of the stock, and an exercise only changes the form of a holding. The other codes include a disposition to the company, a tender in a takeover and J, for anything the list does not name, which the filer must describe in a footnote.
Satya Nadella’s Form 4 filed Sep 2, 2020 shows three kinds on one page. Its first line is an A for 215,783 shares at a price of 0, which the first footnote says were earned under a performance award for the three years ending June 30, 2020. The second is an F for 110,661 shares at $228.91, dated the same day. The third is an S for 83,572 shares on Sep 1. Only that last line was a sale into the market.
Form 4s filed on or after April 1, 2023 carry a Rule 10b5-1 box, as the SEC’s fact sheet sets out. A filer ticks it when a reported transaction was made under a written trading plan, adopted in advance, that is meant to give an affirmative defense against insider-trading claims. The filer gives the plan’s adoption date in the explanation. The same rule change makes a director or officer wait at least 90 days after adopting a plan before the first trade under it. The box is a single tick on the first page, so on a form with several lines it does not say which lines the plan covered. It does not say why the filer adopted the plan either. Earlier forms have no box. Nadella’s 2020 form says in a footnote that the sales were made under a plan adopted on Sep 9, 2019.
Column 6 of Table I says whether shares are held directly or indirectly. Shares in the filer’s own name, in a brokerage account for the filer or held as joint tenants are direct. Shares held in someone else’s name, where the filer shares in the profit, are indirect, as with a spouse or a trust. The two go on separate lines, and column 7 names the indirect kind, such as “By Spouse” or “By X Trust”. A sale from a family trust can therefore sit beside a direct holding on the same form, and the nature column tells them apart.
Several owners of the same shares can file one form jointly. One designated filer goes in the first box, the others are attached as a list, and each owner signs or has an authorized person sign. Nadella’s form is signed by an attorney-in-fact.
A Form 4/A corrects or adds to an earlier Form 4. It names the date of the original, repeats any line it changes in full, and may leave unchanged lines out. Nadella’s 4/A repeats the unchanged A and F lines as well. Nadella’s original gave the sale as one line, 83,572 shares at a price printed as 2261327. Read literally, that is 83,572 times $2,261,327, or $188,983,620,044 of Microsoft stock. The 4/A filed Sep 8, 2020 splits the sale into three lines. They are 13,281 shares at $225.262, 56,846 at $226.1792 and 13,445 at $226.7959. The shares add up to 83,572. The footnotes call each price a weighted average of sales within a stated range. Multiplying each line’s shares by its price and adding gives $18,898,358, and dividing by 83,572 shares gives $226.1327. The original price was $226.1327 with the decimal point left out. A correction like this is why a number on a Form 4 is worth checking before anyone repeats it.
On our site, a Form 4’s record gives each line as filed, with names as filed and the role the filer holds. It says whether the 10b5-1 box was ticked, and says so when the form predates the box. It carries each footnote and the remarks as filed. We do not interpret them, and a footnote can give the reason for a trade.
Every Form 4 is free on EDGAR, on the company’s page and on each insider’s own page.