The term identifies specific individuals within a company who are subject to the reporting requirements and potential liability under Section 16 of the Securities Exchange Act of 1934. These individuals typically include the company’s directors, officers, and any beneficial owners holding more than 10% of the company’s registered equity securities. For instance, a Chief Financial Officer’s stock transactions would fall under these regulations.
Understanding the scope is crucial for ensuring compliance with federal securities laws and maintaining transparency within the market. The regulations aim to prevent insider trading by requiring these individuals to publicly disclose their transactions in the company’s stock. This disclosure provides insight into the sentiments of company insiders and promotes fairness in the market. Historically, the legislation was implemented to address concerns about insider trading during the Great Depression.
