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Selling Shareholders and Insiders
If a company intends to sell securities held by existing security holders for their own account, Item 507 of Regulation S-K requires: • Name of each selling security holder • Identify special business relationships. If a security holder worked for the company, this would need to be disclosed • Disclose amount of security holders securities to be sold, including percentage of outstanding shares • Disclose amount of securities holder intends to sell • Disclose percentage of shares to be owned after each individual sale If a security holder is registered as a business entity rather than a natural person, identify the individual with voting and dispositive authority, (right to sell the security). Furthermore, no shareholder wishing to have free trading shares entered into U.S. capital markets can conceal his or her identity. Any individual associated with a trust or corporate entity must also be identified. Insiders, (officers, or directors owning more than 10% of free trading stock), are viewed differently than non-insider shareholders and treated differently by the SEC. Hence, insiders registering to sell stock are deemed by the SEC to be acting in behalf of the company. Since the company is being registered to sell stock, the SEC requires the shares to be sold at a fixed rate determined by the SEC before the filing clears, not market value. However, insiders may register very small amounts of free trading stock to be sold, in most cases less than 1%, of total holdings owned by all stockholders. Likewise, stock share market value can decrease when insiders attempt to sell. Skeptical investors might be unwilling to invest in companies if insiders sell stock because insiders are privy to negative information about the company. |
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