The following is provided for information purposes, and is not meant to be legal advice.
When someone is appointed a Section 16 officer under the Securities Exchange Act of 1934, the officer of the issuer of any class of equity security shall file a statement with the Securities and Exchange Commission (SEC) on the amount of all equity securities of such issuer, of which he/she is the beneficial owner.
The main purposes of Section 16 are to: (1) discourage trading on inside information by subjecting the trades of insiders to public scrutiny, (2) provide the public with information on which to base investment decisions by giving them an idea of the purchases and sales of insiders, which may indicate private opinion as to a company's prospects, and (3) provide information for recovering any short-swing profits.
The Form 3 is used for the initial filing. Disclosure of information specified in the Form 3 is mandatory. Information disclosed will be a matter of public record and available for inspection by members of the public. The SEC can use the information in investigations or litigation involving federal securities laws or other civil, criminal, or regulatory statutes or provisions, as well as for referral to other governmental authorities and self-regulatory organizations. Failure to disclose required information may result in civil or criminal action against persons involved for violations of federal securities laws.
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