A private transaction refers to a purchase or sale of securities that is executed outside ordinary public trading channels, such as a national securities exchange, and instead occurs through a negotiated or bilateral arrangement between parties. In U.S. securities regulation, the term is used descriptively in insider reporting to distinguish non-market executions from trades conducted in the open market.
Within insider reporting under Section 16 of the Securities Exchange Act of 1934, private transactions represent one way in which a reportable change in ownership may occur, depending on the facts and circumstances of the transaction.
Regulatory Context
Section 16 reporting focuses on changes in beneficial ownership, regardless of whether a transaction occurs through a public market or a private arrangement. Transactions executed privately are subject to reporting when they result in a reportable change in ownership and are not otherwise exempt (17 CFR § 240.16a-3).
On insider reporting forms, purchases and sales executed through private arrangements are commonly reported using the same base transaction codes as market trades. In particular, transaction codes P (purchase) and S (sale) apply to open market or private purchases and sales, as defined in the SEC’s transaction code instructions. The distinction between market and private execution is reflected, where necessary, in the description of the transaction or in accompanying footnotes on Form 4.
Relationship to Open Market Transactions
Private transactions are distinct from open market transactions, which are executed through ordinary trading channels where prices are determined by market activity. The distinction between private and open market transactions is based on how and where the transaction is executed, not on the size of the transaction, the identity of the parties, or the economic motivation behind it.
Some non-market transfers of securities may be classified under separate transaction codes depending on their nature, such as certain issuer-related or exempt transactions. Whether a transaction is described as private depends on the execution method and the applicable reporting framework, rather than on a single categorical rule.
Reporting Treatment
On Section 16 insider filings, private transactions are disclosed with the applicable transaction code, transaction date, number of securities involved, and price. Additional explanatory information may be included to describe the circumstances of the transaction where necessary.
The classification of a transaction as private affects how it is categorized and presented on insider filings, but it does not alter the underlying obligation to report the transaction under Section 16 when applicable.
Sources
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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 purchases and sales
https://www.sec.gov/files/form4data.pdf -
SEC — Ownership Transaction Codes (Forms 3, 4, 5)
https://www.sec.gov/edgar/searchedgar/ownershipformcodes.html