SEC Form 5

What Is SEC Form 5: Annual Statement of Changes in Beneficial Ownership of Securities?

SEC Form 5: Annual Statement of Changes in Beneficial Ownership of Securities is a document that company insiders must file with the Securities and Exchange Commission (SEC) if they have conducted transactions in the company's securities during the year. Officers at a company, for example, must file any transactions regarding the company's equity shares or securities. SEC Form 5 is used for those who failed to report a change in ownership of a company's shares. However, other SEC forms must be filed before SEC Form 5. Form 5 helps to provide disclosure of ownership activity at a company and can prevent illegal activity by insiders or employees.

Understanding SEC Form 5: Annual Statement of Changes in Beneficial Ownership of Securities

The SEC requires insiders, officers, and directors to file a statement of ownership with the SEC for the company's securities that they own. An insider is defined as a company director or senior officer, as well as any person or entity that beneficially owns more than 10% of a company's voting shares.

There are three forms that are associated with ownership of shares. SEC Form 3 is filed when the individual is filing for ownership of shares for the first time. Form 3 must be filed no later than 10 days after they become affiliated with a company. Changes in ownership of the company's stock (purchases or sales) must be filed via SEC Form 4, and typically, the form must be filed within two business days of the ownership change.

Company insiders must file SEC Form 5 if they conducted security transactions during the year, but they failed to report them on SEC Form 4. SEC Form 5 must be filed within 45 days after the company's close of their fiscal year.

Benefits of SEC Form 5

Form 5 helps to prevent illegal insider trading through disclosure. Insider trading is the buying or selling of a security by someone who has access to material non-public information about the security. If the insider makes the trade when the material information has not been announced, the trade is illegal.

For example, in July 2018, a Boston federal jury found Schultz Chan and Songjiang Wang, who worked at Akebia Therapeutics and Merrimack Pharmaceuticals Inc., respectively, guilty of insider trading. Both Chan and Wang denied the charges. However, prosecutors stated that from 2013 to 2014, Wang delivered proprietary information about Merrimack’s positive drug studies to Chan, prior to the Cambridge, Massachusetts-based company’s public announcement of the results. With the knowledge, Chan and his wife made several purchases of Merrimack stock. In one instance, the couple made $136,000.

While filing Form 5 cannot fully avoid illegal insider trading, it is one step toward making individuals and organizations more accountable.

Information Required by SEC Form 5

SEC Form 5 requires the following:

• The name and physical address of the reporting person
• The issuer name and stock ticker
• A statement for the issuer's fiscal year ended (month/day/year)
• If Form 5 is an amendment, the date that the original form was filed (Month/Day/Year)
• The relationship of the reporting person(s) to the issuer (e.g., director, 10% owner, officer, or other)
• If this is individual or joint/group reporting
• A list of the securities, transaction dates, deemed execution dates, transaction codes, amount of securities owned at the end of the issuer’s fiscal year, a note of direct or indirect ownership, and the nature of indirect beneficial ownership

Example of SEC Form 5

Below is the link to download the SEC Form 5: Annual Statement of Changes in Beneficial Ownership of Securities as well as copies of both pages so that investors can get a sense of what's required to complete the form.

Download SEC Form 5

Investors can download a PDF of the two-page form via this SEC Form 5 link. However, please bear in mind that the SEC requires an electronic submission as outlined in the SEC's Form 5 General Instructions.

Below is a copy of SEC Form 5 for illustrative purposes:

SEC Form 5: Page 1

• Page one contains information about the individual who owns or sold the security.
• The relationship to the issuer (the company) must be listed and whether the person is a director, officer, or 10% owner of the company.
• Page one also includes the transaction dates, trading symbol, and ticker, as well as the amounts and dates that the securities were acquired and disposed of (or sold).

SEC Form 5: Page 2

• Page two includes derivatives, such as call and put options, which allow investors the right but not the obligation to buy or sell a stock at a preset price.
• Convertible securities are also listed on page 2, which include bonds that can be converted to stock at a predetermined price or date.