Section 16 Filers: Definition and Filing Requirements

Section 16 of the Securities Exchange Act of 1934 defines individuals who are required to file specific forms with the Securities and Exchange Commission (SEC). These individuals are known as “Section 16 filers” and include:

Key Facts

Definition: Section 16 filers include individuals who are directly or indirectly beneficial owners of more than 10% of a company’s securities, as well as directors and officers of the issuer of such securities.
Filing Requirements: Section 16 filers are required to file specific forms known as Form 3, Form 4, and Form 5. Here’s a brief overview of each form:
- Form 3: This form is filed by new directors, officers, or shareholders, as well as after an initial public offering (IPO).
- Form 4: Beneficial owners, officers, or directors must file this form when there are material changes in their holdings, such as a significant increase in ownership stake.
- Form 5: This form is used to report transactions that were not previously reported on Form 4, including smaller transactions or gifts of shares.
Who Needs to File: Section 16 filing requirements apply to individuals who own 10% or more of a company’s securities or are named directors or officers of the company. It’s important to note that even if an individual does not personally hold 10% of the company’s securities, they may still be subject to Section 16 requirements if they are married to someone who is considered a beneficial owner or hold 10% or greater investment through a group or entity.

Direct or indirect beneficial owners of more than 10% of a company’s securities
Directors and officers of the issuer of such securities

Filing Requirements

Section 16 filers are required to submit the following forms electronically through the SEC’s EDGAR system:

Form 3

Filed by new directors, officers, or shareholders
Filed after an initial public offering (IPO)

Form 4

Filed by beneficial owners, officers, or directors when there are material changes in their holdings
Must be filed within two business days of the transaction

Form 5

Filed to report transactions not previously reported on Form 4
Includes smaller transactions, gifts of shares, or missed Form 4 deadlines

Who Needs to File?

Section 16 filing requirements apply to individuals who:

Own 10% or more of a company’s securities
Are named directors or officers of the company

Even if an individual does not personally hold 10% of the company’s securities, they may still be subject to Section 16 requirements if they:

Are married to a beneficial owner
Hold 10% or greater investment through a group or entity

Sources

FAQs

Who is a Section 16 filer?

A Section 16 filer is an individual who is directly or indirectly a beneficial owner of more than 10% of a company’s securities, or a director or officer of the issuer of such securities.

What forms do Section 16 filers need to submit?

Section 16 filers are required to submit Forms 3, 4, and 5 to the SEC.

When is Form 3 filed?

Form 3 is filed by new directors, officers, or shareholders, as well as after an initial public offering (IPO).

When is Form 4 filed?

Form 4 is filed by beneficial owners, officers, or directors when there are material changes in their holdings.

When is Form 5 filed?

Form 5 is filed to report transactions not previously reported on Form 4, such as smaller transactions, gifts of shares, or missed Form 4 deadlines.

Who needs to file Section 16 forms?

Section 16 filing requirements apply to individuals who own 10% or more of a company’s securities or are named directors or officers of the company.

Are there any exceptions to the 10% ownership threshold?

Yes, individuals may still be subject to Section 16 requirements even if they do not personally hold 10% of the company’s securities if they are married to a beneficial owner or hold 10% or greater investment through a group or entity.

What are the penalties for failing to file Section 16 forms?

Failure to file Section 16 forms can result in civil penalties, fines, and disgorgement of profits.