A grant refers to the award of an equity-related right or instrument by an issuer to a recipient, typically as part of a compensatory or incentive arrangement. In U.S. securities regulation, the term most commonly describes the issuance of stock options, restricted stock units (RSUs), restricted stock, or similar equity-based instruments to officers, directors, employees, or other service providers.
Within insider reporting under Section 16 of the Securities Exchange Act of 1934, a grant establishes an ownership interest or right that may be reportable, depending on the nature of the instrument and the applicable reporting rules.
Regulatory Context
For Section 16 purposes, many equity awards granted by an issuer are classified as derivative securities under Exchange Act Rule 16a-1(c). The grant of a derivative security may itself be a reportable event if it results in a change in beneficial ownership and is not exempt from reporting.
Grants and awards from an issuer are commonly reported on Form 4 using transaction code “A”, which the SEC defines as a grant, award, or other acquisition pursuant to Rule 16b-3(d). Transactions reported under this framework are subject to the reporting requirements of Rule 16a-3.
Reporting Treatment
On Section 16 insider filings, grants of derivative securities are disclosed in the derivative securities table, identifying the type of instrument granted, the number of securities underlying the award, and the grant date. The filing reflects the creation of the derivative position rather than ownership of the underlying equity security itself.
In contrast, grants of non-derivative equity securities, such as certain awards of restricted stock, are reported in the non-derivative table. The reporting distinction depends on whether the instrument awarded is classified as derivative or non-derivative under the SEC’s rules, not on the compensatory purpose of the award.
Relationship to Other Transactions
A grant is distinct from an option exercise, which converts an existing derivative right into ownership of the underlying equity security. It is also distinct from open market transactions, which involve purchases or sales executed through ordinary trading channels.
A grant establishes the initial issuance of an equity-related right or security by the issuer. Subsequent events—such as vesting, exercise, forfeiture, or disposition—are treated as separate transactions for reporting purposes under Section 16, subject to their own classification and disclosure requirements.
Sources
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17 CFR § 240.16a-1(c) — Definition of derivative securities
https://www.law.cornell.edu/cfr/text/17/240.16a-1 -
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 acquisitions and grants
https://www.sec.gov/files/form4data.pdf -
SEC — Ownership Transaction Codes
https://www.sec.gov/edgar/searchedgar/ownershipformcodes.html