Indirect ownership refers to a form of security ownership in which a reporting person does not hold securities in their own name, but is nonetheless considered to have an ownership interest through another person or entity. In U.S. securities regulation, indirect ownership is used to describe situations where a person’s interest in securities arises from an intermediary relationship rather than direct holding.
Within insider reporting under Section 16 of the Securities Exchange Act of 1934, the distinction between direct and indirect ownership determines how ownership is disclosed on insider reporting forms, not whether the securities are subject to reporting.
Regulatory ContextSection 16 reporting is based on beneficial ownership, which for these purposes generally turns on whether a reporting person has a direct or indirect pecuniary interest in the securities. Securities are treated as indirectly owned when the reporting person derives a pecuniary interest through an arrangement or relationship, rather than by holding the securities directly (17 CFR § 240.16a-1, https://www.law.cornell.edu/cfr/text/17/240.16a-1).
Indirect ownership commonly arises through relationships such as family members, trusts, partnerships, corporations, or other entities in which the reporting person has an interest. Whether a particular relationship gives rise to indirect ownership depends on the facts and circumstances governing the reporting person’s pecuniary interest, rather than on formal title alone.
Relationship to Direct OwnershipIndirect ownership is distinguished from direct ownership, where securities are held in the reporting person’s own name and account. Both forms represent ways in which a reporting person may have beneficial ownership for Section 16 purposes, and both must be disclosed when applicable.
The distinction does not imply differences in regulatory significance or obligation. Instead, it serves to clarify how ownership arises and how it must be categorized on insider reporting forms.
Reporting DistinctionOn Section 16 insider filings—such as Form 3, Form 4, and Form 5—indirect ownership must be reported separately from direct ownership. Indirect holdings are accompanied by a description of the relationship or arrangement through which the reporting person derives a pecuniary interest, often provided in a footnote or explanatory column.
This disclosure requirement allows readers of insider filings to distinguish securities held directly by the reporting person from those attributed through indirect relationships, without altering the scope of the reporting obligation under Section 16.
Sources
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17 CFR § 240.16a-1 — Definitions of beneficial ownership and pecuniary interest under Section 16
https://www.law.cornell.edu/cfr/text/17/240.16a-1 -
SEC Form 4 Data Instructions — Disclosure of direct and indirect ownership
https://www.sec.gov/files/form4data.pdf -
SEC Exchange Act Section 16 Overview — Insider reporting framework
https://www.sec.gov/education/smallbusiness/goingpublic/officersanddirectors