Overview
This is a required filing for all directors, officers, and beneficial owners of a company, disclosing their transactions and holdings. The form contains the filer’s information, the amount of securities beneficially owned, and an itemized list of each individual transaction. In order to assure the form is timely, the SEC requires that the form be filed before the end of the second business day following the day on which the transaction occurs.

Form Uses
Form 4 is best used to track insider buying and selling. Key things to watch are:
· How much ownership those close to the company have – Typically companies that have a higher insider ownership perform better because the company’s future is tied to their future.
· The timing of the purchase and sale of “common stock” – Buying and selling common stock involves owners using their own money. The theory is that those close to the company have the best knowledge of the company’s condition, and therefore should serve as a reliable indicator of future company strength.
· The usage of options, grants, and other compensation/awards given to executives – Executives that cash in their options, grants, and other forms of compensation are often seen as having a lack of faith in the company. Heavy selling can indicate trouble ahead.

Reading the Form
There are seven major sections in the Form 4 filing. They are:

1. Title of Security – This simply indicates the type of security, which may include “common stock”, “preferred stock”, or derivatives.
2. Transaction Date – This is the date that the transaction took place.
3. Transaction Code – This is a code that indicates the type of transaction. See the “Transaction Codes” section below for more information.
4. Securities Acquired/Disposed – This section indicates whether the securities were bought or sold, how many shares were transacted, and the total value of the transaction.
5. Amount of Securities Beneficially Owned Following the Transaction – This section indicates the total number of share owned by the filer including the shares bought in the listed transaction.
6. Ownership Form – This indicates the type of ownership. Directly owned securities indicate those held in the reporting person’s name or in the name of a bank, broker, or nominee for the account of the reporting person. If the owner has a contract, understanding, or relationship that permits their shares to be held in the name of another person, then the owner is an indirect owner of the securities.
7. Nature of Indirect Beneficial Ownership – This section sheds light on the relationship, contract, or understanding of indirect ownership.

Transaction Codes
Each transaction listed on the Form 4 filing has a transaction code, which can help you determine the type of securities being transacted. Here is a list of each transaction code:

General Transaction Codes
P – Open market or private purchase of securities
S – Open market or private sale of securities
V – Transaction voluntarily reported earlier than required

Rule 16b-3 Transaction Codes
A – Grant, award, or other acquisition
D – Sale (or disposition) back to the issuer of the securities
F – Payment of exercise price or tax liability by delivering or withholding securities
I – Discretionary transaction, which is an order to the broker to execute the transaction at the best possible price
M – Exercise of conversion of derivative security

Derivative Securities Codes
C – Conversion of derivative security (usually options)
E – Expiration of short derivative position (usually options)
H – Expiration (or cancellation) of long derivative position with value received (usually options)
O – Exercise of out-of-the-money derivative securities (usually options)
X – Exercise of in-the-money or at-the-money derivatives securities (usually options)

Other Sections 16b Exempt Transactions and Small Acquisition Codes
G – Bona fide gift
L – Small Acquisition
W – Acquisition or disposition by will or laws of descent and distribution
Z – Deposit into or withdrawal from voting trust

Other Transaction Codes
J – Other acquisition or disposition (transaction described in footnotes)
K – Transaction in equity swap or similar instrument
U – Disposition due to a tender of shares in a change of control transaction