A gift refers to the transfer of a security from one person to another without consideration, meaning no payment or exchange of value is received in return. In U.S. securities regulation, the term is used descriptively to identify a category of ownership change distinguished by the absence of consideration, not by the relationship between the parties or the purpose of the transfer.
Within insider reporting under Section 16 of the Securities Exchange Act of 1934, a gift may be a reportable event when it results in a change in beneficial ownership that is required to be disclosed under the SEC’s rules.
Regulatory Context
Section 16 reporting focuses on changes in beneficial ownership, regardless of whether a transaction involves consideration. A gift may consist of a direct transfer of equity securities, a transfer to a family member or trust, or another gratuitous disposition that reduces the reporting person’s ownership interest.
For reporting purposes, gifts of non-derivative equity securities are subject to Exchange Act Rule 16a-3. Gifts involving derivative securities are reported under the same general framework, with the reporting treatment depending on whether the derivative position itself is transferred or terminated as part of the gift.
Reporting Treatment
On Section 16 insider filings, gifts are reported using transaction code “G”, which the SEC defines as a bona fide gift. The transaction is disclosed on Form 4 when it results in a reportable change in beneficial ownership, identifying the date of the gift and the number of securities transferred.
The reporting framework does not evaluate the motivation for the gift or assign significance to the identity of the recipient. It records the structural change in ownership resulting from the transfer, consistent with the treatment of other non-market dispositions.
Relationship to Other Transactions
A gift is a type of disposition because it reduces the reporting person’s beneficial ownership. It is distinct from an open market transaction, which involves consideration and market-based pricing, and from an acquisition, which increases beneficial ownership.
The classification of a transfer as a gift depends on the absence of consideration, not on familial relationships, estate planning objectives, or other contextual factors. As with other Section 16 concepts, the reporting rules describe changes in ownership without assigning economic or informational significance.
Sources
-
17 CFR § 240.16a-3 — Reporting requirements for changes in beneficial ownership
https://www.law.cornell.edu/cfr/text/17/240.16a-3 -
SEC Form 4 Data Instructions — Transaction codes and disclosure of gifts
https://www.sec.gov/files/form4data.pdf -
SEC — Ownership Transaction Codes
https://www.sec.gov/edgar/searchedgar/ownershipformcodes.html