SEC Form 3 Explanation

What Is SEC Form 3: Initial Statement of Beneficial Ownership of Securities?

SEC Form 3: Initial Statement of Beneficial Ownership of Securities is a document filed by a company insider or major shareholder with the Securities and Exchange Commission (SEC). 

It is an important step to help regulate insider trading, which is an individual’s buying or selling of a security based on material non-public information. Filing Form 3 helps disclose who these insiders are and track any suspicious behaviors.

According to the SEC, disclosure is mandatory. The information provided on the form is meant to disclose the holdings of directors, officers, and beneficial owners of registered companies. This information becomes public record and is, therefore, available for public inspection.

Who Can File SEC Form 3: Initial Statement of Beneficial Ownership of Securities?

The company insider must file Form 3 with the SEC no later than 10 days after becoming affiliated with a company.

The SEC lists the following who are required to file Form 3:

The form must be filed for each company in which a person is an insider, regardless of whether or not the insider has an equity position in the company at that time.

How to File SEC Form 3

The filer is required to input their name, address, relationship to the reporting person, security name, and its ticker symbol.

There are two tables that also need to be filled out. Table I is for non-derivative securities that are beneficially owned, while Table II is for derivative securities beneficially owned including puts, calls, warrants, options, and convertible securities.

Other Related Forms

Form 3 is also affiliated with SEC Forms 4 and 5, along with the Securities Exchange Act of 1934 (SEA). The SEA was created to govern securities transactions on the secondary market, following their initial issue, to ensure greater financial transparency and less fraud.

Form 4 is for changes in ownership. These changes must be reported to the SEC within two business days, although limited transactional categories are not subject to this reporting requirement. Insiders must file Form 5 to report any transactions that should have been reported earlier on Form 4 or were eligible for deferred reporting.

The SEC adopted new rules and amendments to Section 16 of the Securities Exchange Act in August 2002 in accordance with the provisions of Sarbanes-Oxley, which accelerated the deadline for filing many reports of insider ownership.

In addition to Forms 3, 4, and 5, several other important SEC forms exist. For example, companies must file Form 10-K, an annual report that contains a comprehensive summary of their performance. A 10-K generally includes five distinct sections:

Together, all SEC filings are important sources of information for anyone considering an investment in a company.

Download SEC Form 3: Initial Statement of Beneficial Ownership of Securities

Click this link to download a copy of SEC Form 3: Initial Statement of Beneficial Ownership of Securities.