What is an SEC Filing?

Posted on Monday, November 26th, 2018 MarketBeat Staff

Having access to information is a vital tool that helps protect investors from stock manipulation and fraud. Although most companies work very hard to keep their investors informed and try to be as transparent as possible, they will always try to present their business in a favorable a light as possible, particularly when they have to report on issues that may be of concern to investors.

SEC Filings came into existence, not surprisingly, in the 1930s. After the stock market crash of 1929, many investors looked to the government to provide safeguards against companies that engaged in speculative behavior so that their actions would be more transparent. The result was the creation of the U.S. Securities & Exchange Commission (SEC). The SEC not only requires publicly traded companies to submit these filings, but they also review the filings carefully to make sure they meet certain objective criteria. This means that investors should be able to get an apples-to-apples comparison of two companies filing documents, particularly if they are in the same sector.

In this article, we’ll define an SEC filing and review what information investors receive from each document in the file and how you as an investor can review the filing to get the information you need.

What is an SEC Filing?

An SEC filing is a series of documents that a publicly traded company must file with the United States Securities & Exchange Commission (SEC). Each document serves a specific purpose and together they help give investors a clear view of a company’s past, present, and future. For convenience, many of these SEC Filings can be found on the SEC’s EDGAR database.

The documents required by the SEC are:

  • Registration Statements
  • 10-K Report
  • 10-Q Report
  • 8-K Report
  • Proxy Statement
  • Forms 3,4 and 5
  • Schedule 13D
  • Form 144

Companies must follow SEC guidelines when submitting these forms. The SEC, in its role as a watchdog, reviews the forms to ensure that the information meets their requirements. As an investor, you may find that one form is more useful than another. Investors can glean a little or a lot of information from the reports. Let’s take a look at what type of information each of these documents provides.

Registration Statement– this is a two-part statement that helps investors understand what securities the company is offering and how profitable the company is. All companies must file these forms whether they are foreign or domestic. The two parts are:

  • Prospectus – This is what you may receive from a company when you contact investor relations. This is a legal document that binds the company to give details about the investment being offered, how the business operates, the history of the business, its management structure and management team, the financial condition of the company and guidance as to known risks. The prospectus will also contain financial forms such as income statements which must be audited by an independent certified public accountant (CPA).
  • Additional Information (optional) – if the company has any recent, relevant information that occurred since the prospectus was issued, they can submit it as part of the registration statements. An example would be a recently completed sale of unregulated securities.

10-K Report– This is perhaps the meat and potatoes of the SEC Filings. The 10-K provides a very detailed and comprehensive analysis of the company. It contains much of the information that is in the prospectus and contains even more detailed information than is found in an annual report. One example would be the financial statement –which provides more detail than would be found in an annual report. Companies are required to file this report within 90 days after the close of their fiscal year. The 10-K has several parts to it:

  • Business summary – this describes what the company does (its operations – both domestic and international), outlines its business segments, gives a brief history of the company, and information about the real estate, marketing, research and development efforts (R&D). It will also disclose who their competitors are and the number of employees.
  • Management discussion and analysis (MD&A) – this is the section where the management of the company describes its operation and financial outlook. The information in this section is probably similar to what the company might disclose on their earnings call (conference call).
  • Financial statements – such as the balance sheet, income statement and cash flow statement.
  • Other – this may include relevant information regarding the company’s management team and any legal proceedings.

10-Q Report– This is essentially an abbreviated version of the 10-K report. The 10-Q is issued more frequently than the 10-K and must be submitted within 45 days of the close of the first, second and third quarters of a company’s fiscal year. The purpose of the 10-Q is to give a progress report of sorts about any recent developments and outlines any new plans the company plans to take. Unlike in the 10-K, the financial statements in the 10-Q are not required to be audited and they usually contain less detail than those found in the 10-K.

8K Report– This is an optional document that covers major developments that are of material interest to investors that occurred between the time of the 10-K and 10-Q filings. This document describes the events and gives further details, if needed, such as a press release or financial data. Examples of events that may trigger a company to issue an 8K report would be a bankruptcy filing, the completion of an acquisition, and turnover in their executive ranks.

Proxy Statement– This is a document that provides salaries of top management, outlines any conflicts of interest that might exist for the managers and describes any other perks that were part of their compensation. The proxy statement must be presented before the shareholder meeting and must be on file with the SEC before shareholders are solicited to vote on the approval of corporate actions such as the election of directors.  

Forms 3, 4 and 5– These documents give investors insight into how the company’s officers and directors may shift ownership and purchases.  

  • Form 3 – this is the initial filing that lists the ownership amounts.
  • Form 4 – this form identifies changes in ownership
  • Form 5 – this form is a summary of Form 4 that is prepared annually. Form 5 also includes information that the company should have reported.

Schedule 13-D– This is a hard-working form that provides investors with a wealth of information that includes first and foremost a disclosure of who owns most of the company’s shares. It also introduces the owner(s) and gives investors contact information. A Schedule 13-D is required to be filed within 10 days of any entity acquiring 5% or more of any class of a company’s securities. Additional information in the Schedule 13-D includes:

  • Background information on the owner including the relationship (and type of relationship) the owner has with the company. It can also include any criminal misbehavior.
  • Explains why the transaction is taking place
  • Describes the security by its type and class
  • Describes where the money for the purchase is coming from

Form 144– This form has to do with the sale of restricted stock by company insiders that was not part of a public offering. Investors can identify patterns regarding when these securities were sold or when there was pressure to sell such shares. Restricted stock must meet specific conditions in order to be transferable. The sale must be made within 90 days of filing. This form must be filed if the amount sold during any 3-month period exceeds the specified sales thresholds.

How does an SEC Filing account for foreign investments?

As of a 2008 rule change, foreign companies who do not own SEC-registered securities are not required to submit paper disclosures to the SEC. Investors can now access such forms on the internet. Because the companies are required to submit annual reports to the SEC two months earlier than other companies, investors will have access to those reports in a more timely fashion.  

What is an investor looking for in an SEC filing?

Although some of the information in an SEC filing is straightforward, some information requires paying very close attention to the entire filing. One pro tip is for investors to read the filings in total rather than as individual documents. This is particularly important when looking at a company's financial statements because some documents are geared to a company's short-term outlook and some present a more long-term view. Attention should be given to red flags such as if the company discredits short sellers, if there is confusing language in the 10-K or 10-Q, or if there are sudden, unexplained one-time or special charges.

The bottom line on SEC filings

The vast majority of publicly traded companies want to provide timely and accurate information to investors. To help ensure this information is disclosed to investors in a timely fashion, the SEC requires a series of documents to be filed at specific times. These SEC Filings can give investors a detailed look inside the financial workings of a company.

One of the most valuable parts of the SEC Filings for an investor is the 10-K report. As part of the 10-K report, the company is required to submit detailed financial information including an income statement, balance sheet, and cash flow statement. These documents contain fundamental information from which investors can perform a variety of other calculations as part of their fundamental analysis of a company.

Like a conference call that companies give to review earnings reports, an SEC filing can allow investors to hear from a company’s management about certain events that may have occurred. These may include instances of systematic risk such as severe weather or political unrest that has affected currency exchange rates. Investors can then make an informed decision on whether they view the event as something that will weigh on the long-term fortunes of the company.




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