Key Takeaways
- The SEC is a government body that oversees companies and requires them to disclose financial information and events to investors.
- There are a number of filings that companies have to file. The key ones include the Form 10-K, Form 10-Q, Form 8-K, Forms 3, 4, and 5, and Schedule 13D.
- The 10-K is one of the most important filings for investors because it provides comprehensive financial statements and information about the company.
- You can use the information provided in the SEC filings to do fundamental analysis and research to make decisions about your investment portfolio.
- Companies publish their filings at EDGAR, the SEC’s online database.
What is the Role of the SEC?
The SEC is an independent government body established by the Securities Exchange Act of 1934. It was created in order to restore investor confidence following the stock market crash of 1929. The agency is tasked with maintaining a fair market, protecting investors and facilitating access to capital.
The SEC monitors and oversees companies to ensure that they are providing accurate and complete information to investors. It is tasked with making sure that everyone has access to specific information about publicly traded companies.
It does this by requiring companies, fund and asset managers, and other participants in the market to regularly disclose specific financial data. This is to ensure investors have access to timely and accurate data to make informed decisions about how to invest.
Main Types of SEC Filings
There are a number of forms that the SEC requires companies to provide on a quarterly and annual basis, as well as when certain events happen, such as a stock split or a board member is appointed. Here are some of the main types of SEC filings that retail investors should know:
Form 10-K
The Form 10-K is an annual audited report filed by companies. It contains an overview of the company’s financial statements over the past year, as well as any forward looking statements. While it can overlap with a company’s annual report, it’s a different document. The annual report may include some but not all of the same information and usually includes charts and graphics.
The 10-K is comprehensive and filed within 60 to 90 days of the close of the company’s fiscal year. It includes a number of parts with comprehensive and detailed information for investors including:
- Financial statements including revenue, balance sheet, and cash flow statements
- Changes in management
- Current operations
- Areas of concern and competition such as legal proceedings or regulatory issues
- Future company plans
While Form 10-K is very dense, the plethora of information and data is the reason it’s one of the most important documents that investors should understand and read. The information in the 10-K gives investors a comprehensive overview of the company and its financial standing, which in turn helps investors decide whether or not to invest in said company.
Many investors use fundamental analysis to understand a company’s 10-K. This is a type of analysis that looks at ratios and other metrics based on a company’s financial statements. That includes looking at a company’s revenue, earnings, return on equity, profit margins, and more.
Other items in a Form 10-K that investors should watch out for include any legal proceedings or statements that indicate future volatility or concerns about regulatory, economic or political events that could have an impact on the company’s financials.
Form 10-Q
The 10-Q is similar to the 10-K but is filed on a quarterly basis. It includes financial statements and information on an ongoing basis. It’s filed for the first three quarters of the fiscal year (the 10-K is filed for the last quarter). Companies have until 40 days after the last day of the quarter to submit their 10-Qs.
The 10-Q is less dense then the 10-K and is not audited. But it still provides essential data for investors. Because 10-Qs are submitted quarterly, it gives investors the chance to update their metrics and to keep track of any changes that may be happening at the company.
Some of the essential items that investors can find out in the 10-Q include:
- Updates on legal proceedings
- Changes to capital
- Share buybacks
- Inventory risks
The information in the 10-Q can also be used for fundamental analysis. Investors will often look at a number of competitors to see how the sector overall is faring and how the company they are investing in compares to others.
