Form 4 Indirect Ownership: Reading the “I” and the Trust Footnotes

Most Form 4 guides stop at the transaction code. This one is about a different part of the row: the “D” or “I” beside it. Form 4 indirect ownership is how an insider reports shares held through a trust, a spouse, or an entity, and it is routine. A single filing can show a purchase under one name and a footnote saying the insider “disclaims beneficial ownership” of the very shares reported. That looks contradictory until you know the rule behind it.

If you already know your way around the basics (our guide to reading a Form 4 and the transaction codes breakdown cover them), this post fills the gap: what the ownership field requires, why share counts can look inflated, and how to read two real filings from 2026.

The D or I in the ownership column

On the SEC’s Form 4 and its general instructions, Table I (non-derivative securities such as common stock) has seven numbered columns. Column 5 is the amount owned following the reported transaction. Column 6 is “Ownership Form: Direct (D) or Indirect (I),” and Column 7 is “Nature of Indirect Beneficial Ownership.” In Table II (derivatives such as options) the same two fields are Columns 10 and 11. Many data sites show these as simple “D” or “I” labels, so the column numbers matter less than the content.

The instructions require direct and indirect holdings to be reported on separate lines, and different forms of indirect ownership on separate lines too. The nature of the ownership must be “stated as specifically as possible,” and the form’s own examples are “By Self as Trustee for X,” “By Spouse,” “By X Trust,” and “By Y Corporation.”

Why insiders report shares they do not hold in their own name

Two different tests are in play. For deciding whether someone is a 10% holder, the instructions say a person is deemed to own securities over which they exercise voting or investment control. For reporting transactions and holdings, the test is different: a person is the beneficial owner if they have the opportunity, directly or indirectly, to profit or share in any profit from a transaction in the securities. The SEC calls that a “pecuniary interest.”

Rule 16a-1(a)(2)uses the same definition. The reach comes from the instruction that a pecuniary interest can arise “by reason of any contract, understanding or relationship (including a family relationship or arrangement)” in securities held in another person’s name. The same instruction treats shares in the insider’s own name, in a broker’s nominee name, or held as joint tenants or community property as direct. The reason this matters is Section 16 itself: reporting and the six-month short-swing rule both follow the beneficial owner, so shares that count for one count for the other.

Household family, partnerships and trusts: the three common paths

Rule 16a-1(a)(2)(ii) lists the situations that most often produce an “I”:

For entities, the instructions say to report the number of securities representing the filer’s proportionate interest, or, at the filer’s option, the entire amount of the entity’s interest. That option is one reason a share count on an indirect line can look large next to the insider’s direct stake.

How trustees, beneficiaries and settlors report under Rule 16a-8

Rule 16a-8sorts out who reports a trust’s holdings. In plain English:

A trust that itself owns more than 10% of a registered class is subject to Section 16 and its trustee reports. Anyone made subject to Section 16(a) under the rule is also subject to Sections 16(b) and 16(c).

Reading a real filing: a fund president’s family trusts

A Form 4 for the Cliffwater Corporate Lending Fund, signed July 9, 2026, covers Stephen Lane Nesbitt, a director and the fund’s president. It reports a code P (open-market or private purchase) of 40,487.805 Class I Shares at $10.25 on July 7, 2026. The row is marked Indirect, and shares owned after the transaction are listed as 11,221,309.172.

The footnote explains the “I”: the shares are held by trusts for the benefit of Mr. Nesbitt’s family, and he disclaims beneficial ownership of them. Read plainly, the filing does what the instructions ask. The trusts hold the shares, the family relationship creates a reportable interest, and the nature-of-ownership text says so.

Reading a second filing: a director’s five trusts at C4 Therapeutics

The second example looks busier but contains one transaction. In a Form 4 for C4 Therapeutics signed October 2, 2026, director Kenneth C. Anderson reported a code A grant of 3,662 shares at $3.14, the October 1 closing price, under the non-employee director compensation policy. He elected stock in lieu of cash. It is held directly (D), with 75,612 shares owned afterward, and the Rule 10b5-1 box is not checked.

Each trust sits on its own line, as the instructions require, and each is footnoted with a disclaimer except to the extent of his pecuniary interest. The five indirect lines report what the trusts hold. They are not five new purchases, and they should not be added to the new grant. This is also a good place to separate a grant from a market purchase: our transaction code guide explains why a code A row carries different information than a code P.

What a “disclaims beneficial ownership” footnote does and does not mean

Rule 16a-1(a)(4) lets a filer state that the filing “shall not be deemed an admission” that the person is a beneficial owner for Section 16 or other purposes. The common formula, as in the C4 filing, adds “except to the extent of pecuniary interest.” Both versions preserve a legal position: the insider is reporting because the rule requires it, without conceding ownership for any other purpose.

The footnote is also useful to you: it tells you the filing is explaining itself. Both filings above do.

What research says about indirect trades

Goldie, Jiang, Koch and Wintoki studied trades made through accounts insiders control, such as family, trust, retirement and foundation accounts, in the Journal of Financial and Quantitative Analysis(vol. 58, issue 6, 2023). They find indirect trades are more profitable than direct ones, carry more information about earnings surprises and large price moves, and are more common among “opportunistic” insiders and at firms with high information asymmetry. Insiders make fewer indirect trades after periods of intense regulatory scrutiny. A University of Kansas write-up of the study reports that indirect trades make up 18% of all insider trades, identified using the Form 4 field that flags direct versus indirect.

A separate paper, Avci, Schipani, Seyhun and Verstein’s “Insider Trading by Other Means” in the Harvard Business Law Review (2025), looks at concealment more broadly. The authors argue some insiders report suspicious trades in ways that confuse investigators, including miscoding and empty footnotes, and report that insiders using those techniques outperformed the market by up to 20% on average. A summary on TheCorporateCounsel.net highlights J-coded transactions and filings missing a required explanatory footnote.

For more on separating signal from routine activity, see our guide to opportunistic versus routine Form 4 trades.

A checklist for reading indirect rows

• 1
  Read the nature-of-ownership text.“By Spouse” and “By X Trust” are different relationships. A vague entry is worth a second look at the footnote.
• 2
  Ask whether it is a trade or a holding. Rows with a transaction code and price are trades. Rows listing only shares owned are holdings.
• 3
  Check proportionate versus whole.The filer may report a proportionate share or, at their option, the entity’s entire interest.
• 4
  Watch for duplicates. When several owners must report the same transaction, they may file jointly or separately, so the same shares can appear in more than one filing.
• 5
  Check the 10b5-1 box and the footnotes. Our 10b5-1 plan guide covers what the checkbox means.
• 6
  Remember Section 16(b). Because the rule follows pecuniary interest, indirect holdings can count toward the six-month short-swing rule. See our Section 16(b) explainer.

None of this tells you what a trade means for a stock’s future. It tells you what the filing reports and why. That is the foundation for any further analysis.