The following are terms that may be helpful for understanding the Section 16 process and working with the Section 16 application. The Section 16 application facilitates the filing of Section 16 forms 3, 4, 5, and their amended versions. Forms and libraries allow you to reuse many types of information in order to streamline your filing process and improve your accuracy and consistency.
Section 16 Terms
| Term | Definition | Notes |
|---|---|---|
| Section 16 | Section 16 refers to a section of the Exchange Act of 1934. This requires the reporting of beneficial ownership by officers, directors or stockholders who possess (directly or indirectly) ownership in excess of 10% of a company's common stock or other security type. | Users include: companies that have recently gone public; companies who are already public and are new to the Section 16 application; private companies who trade on the stock exchange market. |
| Issuer | The company issuing the securities. | Most commonly the company using the Section 16 application. Can also be a third party. |
| Reporting Owner | The person receiving the securities from the issuer. | Reporting owners can be a director, officer, 10% owner, or other (such as an interim officer or director). |
| Security | A financial stake in a company that represents a monetary value. | The most common securities include restricted stock units, performance stock units, common stock, preferred stock and stock options. |
| Derivative Securities | Securities whose value is derived from an underlying security. |
Example: restricted stock units get their value from common stock. These securities go on Table 2 of the form. |
| Non-Derivative Securities: | Securities whose value is not derived from another security. |
A tradable financial asset. Example: common stock. These securities go on Table 1 of the form. |
| Holding | A snapshot of the securities held by a reporting owner. |
Holdings include both derivative and non-derivative securities. |
| Transaction | The purchase, sale or redemption of a security. |
Transactions are any action taking place related to securities such as the granting of shares or selling of stocks. |
| Exercise | When a derivative security is being converted or vested. |
Most commonly on an annual basis. Can also be referred to as vesting. |
| Acquire | When a reporting owner receives or is granted securities. |
Can also be acquired by vesting or converting a derivative that become a non-derivative security. |
| Dispose | A reporting owner gets rid of securities. |
Also called selling or vesting. |
| Grant | When an issuer gives securities to a reporting owner. |
Most common types of grants are restricted stock Units and Performance Stock Units |
| Vesting | The earliest date securities can be sold or converted. |
Vesting usually happens on an annual basis. There will be a vesting schedule put in place by the issuer. |
| Direct | The security is held or owned solely by the reporting owner. |
Direct is the most common ownership status. |
| Indirect | The security is held by an outside party but is required to be reported by the reporting owner because there is a "possibility" that they will indirectly benefit from transactions on the security. |
Outside parties can include a spouse, retirement fund, family trust or individual trust. |
Application Terms
| Term | Definition | Notes |
|---|---|---|
| Filers | Filers refers to the person or persons who will be submitting the information to the SEC. |
The person doing the actual filing is an employee of the company. The two filer types are reporting owners and issuers. |
| Libraries | The Libraries tab contains all additional information for a form. This includes Footnotes, Securities, Signatures, Supporting Documents and Reviewers. | The Libraries are where all information is stored and is accessible to use in appropriate forms. |
| Footnotes |
Footnotes contain additional information attached to facts within a filing form. |
Footnotes can be attached to almost any field in a holding or transaction. |
| Remarks |
Remarks are additional information outside of footnotes that can be added to the bottom of a form. |
The most common remarks refer to the attachment of an Exhibit 24: Power of Attorney to a form. |
| Signatures |
Most of the time signatures refer to the signature of the reporting owner. Sometimes this can refer to a signature of a Power of Attorney signing on behalf of a reporting owner. |
Signatures can be created in Libraries and associated with a reporting owner. Signatures can also be removed and added directly on a form. |
| Supporting Document |
Supporting document refers to anything attached to the form as proof or fact substantiation. |
The most common supporting document is an Exhibit 24:Power of Attorney. This is required when the POA is signing for a reporting owner, usually only required with Form 3. |
| Reviewers |
Reviewers are added via email address to be sent forms for comment or feedback. |
Adding a reviewer will populate them in the email Recipients field when sending out a form. |