SEC Filings: Forms You Need To Know

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The Securities and Exchange Commission (SEC) requires certain financial statements and other formal documents to be submitted to them regularly. Public companies, certain company insiders–which the SEC defines as officers, directors, major stockholders, and employees of a public company–and broker-dealers are required by the SEC to make regular filings. Financial professionals and investors rely on the information that the SEC makes public in order to make prudent decisions when they are evaluating a company for investment purposes. Many SEC filings can be accessed for free by the public through their database, called EDGAR.

The statements and other formal documents required by the SEC provide detailed information about the financial and operational health of domestic and foreign companies. They are intended to help investors and other stakeholders make reasonable assumptions about a given company’s future.

The SEC was created through the Securities Exchange Act, which was passed by President Franklin D. Roosevelt on June 6, 1934. The regulations set forth by the SEC were intended to help restore investor confidence after the stock market crash of 1929. As an independent agency of the U.S. government, the SEC is tasked with regulatory duties and preventing manipulation and fraud in the public stock market.

The SEC verifies the quality of the information provided in the forms it receives. Investors then study these filings for clues, either to get a snapshot of the company’s performance, or a more comprehensive description of its activities. Here are some of the most common forms that companies are required to submit to the SEC.

Key Takeaways

  • Investors can assess the health of a company and make assumptions about its future by reviewing its required SEC filings.
  • Registration statements provide details about security offerings and a company’s profitability.
  • A 10-K report provides a comprehensive annual summary of a company’s financial performance.
  • Proxy statements are required before soliciting investors and include voting procedures, directors’ background information, managers’ salaries, and other information not readily accessible in other statements.

Registration Statements

Registration statements provide investors with an understanding of the securities that a company offers and the profitability of the company. All publicly-traded foreign and domestic companies must file these statements or qualify for an exemption. Registration statements consist of two parts:

  • Prospectus: A legal document that charges any company that issues securities with providing details about the investments it offers, how the business operates, the company’s history, management, and details about its financial condition. The financial forms included in the prospectus–such as the company’s income statement–must be audited by an independent certified public accountant (CPA).
  • Additional information: In addition to the prospectus, the company may provide any relevant additional information, for example, any recent sales of unregistered securities.

Form 10-K

Form 10-K provides investors with a comprehensive analysis of the company. The financial statements included in the 10-K are more detailed than what is included in the Prospectus section of a company’s Registration Statement. Companies must submit this lengthy annual filing within 90 days of the end of their fiscal year.

The Form 10-K is comprised of several parts:

Form 10-Q

Form 10-Q is a truncated version of Form 10-K. The 10-Q Form must be submitted within 45 days of the end of each of the first three quarters of a company’s fiscal year. It details the company’s latest developments and provides a preview of the direction it plans to take in the future. Unlike Form 10-K, the financial statements in Form 10-Q are unaudited. The required reports in Form 10-Q are less detailed than what is required in Form 10-K.

Form 8-K

Major company developments are described either in Form 10-K or Form 10-Q, but if a major company event occurs after the filing of either of these forms, a company may be required to submit Form 8-K. Major company events that may necessitate the filing of Form 8-K include: bankruptcies or receiverships, material impairments, completion of acquisition or disposition of assets, or departures or appointments of executives.

Proxy Statement

In the Proxy Statement, investors can view the salaries of the management of a company and any other perks that a company’s management is eligible for. The Proxy Statement is presented prior to the shareholder meeting and must be filed with the SEC before soliciting a shareholder vote on the election of directors and approval of other corporate actions.

Forms 3, 4, and 5

All corporate insiders–defined by the SEC as “a company’s officers and directors, and any beneficial owners of more than ten percent of a class of the company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934″–must file Forms 3, 4, and 5. These forms are meant to reveal more information about the securities that company insiders own.

  • Form 3, the initial filing, tells the ownership amounts.
  • Form 4 identifies the changes in ownership.
  • Form 5 is an annual summary of Form 4 and includes any information that should have been reported.

Schedule 13D

  • Background information on the owner (e.g., criminal misbehavior) and the type of relationship this owner has with the company
  • An explanation of why the transaction is taking place
  • The type and class of the security
  • The origin of funds used for purchases

Form 144

With Form 144, investors get clues to a corporate insider‘s pattern of selling securities and pressure to sell. It’s a notice of the intent to sell restricted stock, typically acquired by corporate insiders or affiliates in a transaction not involving a public offering. The stock is restricted because it must meet certain conditions before becoming transferable. The transaction, or at least part of it, is made within 90 days of filing. Form 144 is required when the amount sold during any three-month period exceeds certain sales thresholds.

Foreign Investments

US investors’ participation in cross-border securities has eased as a result of a 2008 rule change. The SEC recognized global and technological changes by eliminating the need for foreign companies without SEC-registered securities to submit paper disclosures and instead allowing investors to access them in English on the Internet. Investors will also receive more timely annual reports because the companies will have to submit them to the SEC two months prior.

Reading the SEC Forms

Understanding the information submitted by companies involves taking some extra steps to read between the lines. Review SEC documents together as opposed to separately to get a better view of the overall picture, especially with the financial forms. Financial ratios are often used in the statements to identify the company’s short- and long-term financial strength.

Red flags are often revealed in a company’s footnotes. Red flags include:

  • Paying attention when the company discredits short sellers
  • Very confusing sections in a 10-K or 10-Q
  • Sudden one-time or special charges

The Bottom Line

Ultimately, the SEC wants investors to know the facts so that they can make informed decisions about when they buy, sell, or hold a company’s securities. Obtaining the available material and interpreting it correctly can provide any investor with valuable guidance when making investment decisions.


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