How to Read an SEC Form 4: Transaction Codes Explained
A plain-English guide to SEC Form 4 insider filings: who files them, how fast, what each transaction code means, and why only two codes (P and S) reflect a real buy or sell decision.
Every time a director, officer or large shareholder of a US-listed company trades its stock, the SEC wants to know within days. The document that carries that information is Form 4. It is public, free and machine-readable, and it is the raw material behind every "insider buying" headline you have ever seen. It is also easy to misread.
This guide explains who files a Form 4, how quickly, and how to tell a genuine open-market purchase from the paperwork noise that surrounds it.
Who files a Form 4?
Form 4 is required under Section 16 of the Securities Exchange Act from three groups, together called insiders:
- Directors of the company
- Officers (CEO, CFO and other executives who run the business)
- Beneficial owners of more than 10% of a class of the company's registered equity
They must report changes in their holdings of the company's own securities, including stock, options and other derivatives.
How fast does it have to be filed?
A Form 4 is due before the end of the second business day after the transaction. That is why insider data is among the freshest public information about a company: a purchase on Monday is normally public by Wednesday night.
Compare: Members of Congress can take up to 45 days to disclose a trade, and 13F fund holdings arrive up to 45 days after the quarter ends. See how Congress trades are disclosed and what Form 13F shows.
The anatomy of a Form 4
You do not need to read every box. These are the parts that carry meaning:
- Reporting person and relationship. The name, plus whether the person is a director, officer (with title) or 10% owner. A CEO buying says something different from an outside director buying a token amount.
- Issuer and ticker. The company the shares belong to.
- Table I: non-derivative securities. Common stock transactions. This is where open-market buys and sells appear.
- Table II: derivative securities. Options, warrants, restricted stock units and similar instruments.
- Transaction date, code, shares, price and the A/D flag. Whether shares were acquired (A) or disposed of (D), at what price, and under which code.
- Shares owned after the transaction. Lets you see how large the trade was compared with the insider's total stake.
- Footnotes. Often the most informative part, because this is where the filer explains the circumstances.
The transaction codes
Every line carries a one-letter code. These are the ones you will meet most often:
| Code | Meaning | Is it an investment decision? |
|---|---|---|
| P | Open-market or private purchase | Yes: a buy |
| S | Open-market or private sale | Yes: a sell |
| A | Grant or award from the company | No: compensation |
| M | Exercise of a derivative (e.g. an option) | Mostly no: mechanical |
| F | Shares withheld to pay exercise price or taxes | No: tax mechanics |
| G | Gift | No |
| C | Conversion of a derivative into stock | No |
| D | Disposition back to the issuer | Usually no |
| X | Exercise of an in-the-money derivative | Mostly no |
| J | Other (explained in a footnote) | Read the footnote |
The practical lesson: only P and S show an insider choosing, with their own money, to buy or sell on the market. An executive "acquiring" 200,000 shares through code A just received a pay package. A large "disposition" under code F is usually shares withheld to cover taxes on vesting. Treating every filing that is not a sale as a purchase is a common error, and it inflates the apparent amount of "insider buying" dramatically.
Why sells are noisier than buys
Insiders buy for essentially one reason: they expect the shares to rise. They sell for many reasons: diversification, a house, taxes, a divorce, scheduled plans. So a lone sale tells you little, while a purchase with personal cash tells you more. Academic work on US insider trades (notably Jeng, Metrick and Zeckhauser) found that insider purchases earned significant abnormal returns of more than 6% a year in their sample, while insider sales did not earn significant abnormal returns.
Since 2023, Form 4 also has a checkbox showing whether a trade was made under a pre-arranged Rule 10b5-1 plan. A sale under a plan adopted months earlier carries even less information about current sentiment.
A short checklist for reading a filing
- Is the code P or S? If it is anything else, treat it as housekeeping unless a footnote says otherwise.
- Who is the filer? A CEO or CFO buying carries more weight than an outside director.
- How big is the trade compared with their existing holding?
- Is it the only purchase, or are several insiders buying at the same time? Several is much more interesting. See insider cluster buying.
- Read the footnotes.
Where to find them
Every Form 4 is on the SEC's EDGAR database, free of charge. Bourse reads new filings as they are published, keeps only the genuine open-market buys and sells (codes P and S), and shows them next to Congress trades and fund holdings. See how to track all three for free.
See these filings as they land
Bourse collects Congress trades, SEC Form 4 insider filings and 13F fund holdings in one live feed, and flags insider buying clusters automatically. Free to start.
Bourse provides financial data and editorial information, parts of which are generated by AI. This page is for general education only. It is not personalised investment advice or a recommendation to buy or sell any financial instrument. Make your own decisions.