Methodology

Red Flag Radar turns SEC EDGAR filings into structured, sourced red flags. Detection is deterministic: every flag is raised by an explicit rule over a filing's text or structured data, scored from 0 to 100, and tied to the exact filing it came from. This page explains how the scoring works and what each flag means. It is not investment advice.

Deterministic by design

There is no machine-learning black box in the current product. Each flag comes from a rule a reader can check against the filing. That keeps the output explainable and the false-positive rate auditable.

Severity, 0 to 100

Each flag type carries a base severity. Restatement and auditor resignation rank highest; late filing is medium to high; Form 4 clusters are contextual. Context then adjusts the score: recency, how many flags accumulate on the same issuer, repetition over 30, 90 and 180-day windows, and combinations (an auditor change together with a material weakness and a late filing reads more seriously than any one alone). Severity scores the disclosed filing signal, not the company or its securities.

Confidence, separate from severity

Confidence is reported apart from severity. It is high when extraction is clean and structured, medium when the signal is detected in text with context, and low when extraction is ambiguous. Confidence answers how sure we are that the filing says this; severity answers how serious the disclosed signal is.

Evidence, always

Every flag links to its source. Each one records the accession number, form type, filing date, SEC URL, the section or item, a brief excerpt, the rule that fired, and the timestamp of the scan. If a flag cannot be sourced to a filing, it is not published.

What this is not

A flag is not a recommendation, not a prediction of fraud, and not a verdict on any company. Each one reports a fact disclosed in a public SEC filing, with a link to that filing. Factual report of a public SEC filing. Not an allegation of wrongdoing. Not investment advice.

Red flags we detect

Block A: accounting and audit

• Restatement / non-reliance 8-K Item 4.02 · typical severity: Very high
  The company disclosed that prior financial statements should no longer be relied upon. Non-reliance is among the strongest accounting red flags in SEC filings.
• Auditor change 8-K Item 4.01 · typical severity: Very high
  A change of independent auditor, especially with disclosed disagreements, is an audit and governance signal.
• Late filing notification NT 10-K / NT 10-Q · typical severity: Medium to high
  A late-filing notification (NT 10-K / NT 10-Q) means required financial statements were not filed on time.
• Going concern 10-K / auditor opinion · typical severity: High
  A going-concern disclosure reflects substantial doubt about the company's ability to continue operating.
• Material weakness 10-K / 10-Q Item 9A · typical severity: High
  A material weakness is a deficiency in internal control over financial reporting that could allow a material misstatement to go undetected.

Block B: governance and ownership

• Insider selling cluster Form 4 · typical severity: Contextual
  A cluster of insider sales over a rolling 30-day window is a disclosed ownership signal in Form 4 filings.
• Unplanned executive departure 8-K Item 5.02 · typical severity: Medium
  An unplanned departure of a CEO or CFO without a clear succession is a governance signal.
• Ownership concentration jump 13D / 13G · typical severity: Contextual
  A new significant ownership position (13D / 13G) is a disclosed change in the shareholder base.
• Subsequent event disclosure 10-K / 10-Q · typical severity: Medium
  A subsequent-event disclosure reports a significant event after the reporting period closed.
• Large goodwill impairment 10-K / 10-Q · typical severity: Medium
  A large goodwill impairment is a disclosed write-down of previously recognized acquisition value.