SEC Form 3: Initial Statement of Beneficial Ownership
SEC Form 3 is the initial disclosure that company insiders and certain large shareholders must file to report their beneficial ownership of a public company’s securities. The form creates a public record of holdings to promote transparency and help deter insider trading.
Purpose
- Discloses holdings of directors, officers, and large beneficial owners.
- Provides the public and regulators a baseline for tracking subsequent changes in insider ownership.
- Becomes part of the public record.
Who must file
A Form 3 must be filed by any person who becomes an “insider” of an issuer, including:
– Directors and officers of an issuer with a class of equity securities registered under the Securities Exchange Act.
– Beneficial owners of more than 10% of any class of equity securities.
– Certain trustees, settlors, beneficiaries, investment advisers, or other affiliated persons required to report.
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A separate Form 3 is required for each company in which the person is an insider, even if the filer does not hold any equity at the time of filing.
When to file
- File no later than 10 days after becoming an insider or otherwise becoming required to report.
What to report
The form requires basic identifying information and details about the securities owned:
– Filer’s name, address, and relationship to the reporting company.
– Security name and ticker symbol.
– Two reporting tables:
– Table I: Non-derivative securities beneficially owned (e.g., common stock).
– Table II: Derivative securities beneficially owned (e.g., options, warrants, convertible securities, puts and calls).
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Related filings and differences
- Form 4: Reports changes in ownership (acquisitions/dispositions). Must generally be filed within two business days of the transaction.
- Form 5: Annual statement to report certain transactions that were eligible for deferred reporting or were missed on Form 4.
Form 3 is the initial ownership statement; Form 4 reports subsequent changes; Form 5 captures transactions deferred or missed during the year.
Triggers for filing
- Becoming a director, officer, or beneficial owner above the reporting threshold.
- Any change in status that makes a person subject to Section 16 reporting obligations.
Penalties and enforcement
- Illegal insider trading—trading on material nonpublic information—can result in civil and criminal penalties, including fines and imprisonment.
- Timely and accurate reporting is required; failure to file or false statements can result in enforcement actions.
Key takeaways
- Form 3 establishes an insider’s initial publicly reported holdings.
- It must be filed within 10 days of becoming an insider.
- Subsequent ownership changes are reported on Form 4 (near real time); missed or deferred items on Form 5.
- The forms collectively promote transparency and help detect potentially unlawful insider trading.