Isn't insider trading illegal?

No. Corporate executives and other insiders can legally buy and sell shares of their own company's stock as long as they do so without benefit of material non-public information. To ensure that they comply with this rule, insiders must report all transactions involving their own company's stock

What is a Form 4?

A Form 4 reports a change in an insider's ownership position to the SEC. It is filed any time an insider makes a purchase, sale, option exercise, etc. in their company's stock. The Form 4 lists the insider's name and relationship to the company, as well as the number of shares traded in the reported transaction and the share price. It also gives the date of the trade and the total holdings of the insider after the transaction.

When does a Form 4 have to be filed?

As of August 29th 2002, the SEC requires insiders to report transactions involving their own company's stock within two business days. Prior to this, transactions were required to be reported by the 10th day of the month following the transaction. This reduction in the reporting window has made insider trading information much more relevant to individual investors.

How many Form 4s are filed each day?

On average, 1000 Form 4s are filed each day, though there have been days where over 4000 Form 4s were filed.

How accurate is the data contained on the Form 4s?

The vast majority of Form 4s submitted to the SEC are accurate, however a small percentage of forms are submitted with errors. The most typical errors are:

• Incorrectly reported share price
• Incorrectly reported company ticker symbol
• Submitting a Form 4 twice to the SEC
• Reporting the total transaction value in the share price field

What regulations govern insiders?

Section 16 of the Securities and Exchange Act bars insiders from reaping "short-swing" profits. A short-swing profit occurs when an insider buys and sells their own company's stock inside of six months.

What do the Form 4 transaction codes mean?

According to the offical Form 4 filing instructions from the SEC:

General Transaction Codes

• P: Open market or private purchase of non-derivateive or derivative security
• S: Open market or private sale of non-derivative or derivative security
• V: Transaction voluntarily reported earlier than required

Rule 16b-3 Transaction Codes

• A: Grant, award or other acquisition pursuant to Rule 16b-3
• D: Disposition to the issuer of issuer equity securities pursuant to Rule 16b-3
• F: Payment of exercise price or tax liability by delivering or withholding securities incident to the receipt, exercise or vesting of a security issued in accordance with Rule 16b-3
• I: Discretionary transaction in accordance with Rule 16b-3 resulting in acquisition or disposition of issuer securities
• M: Exercise or conversion of derivative security exempted pursuant to Rule 16b-3

Derivative Securities Codes (Except for transactions exempted pursuant to Rule 16b-3

• C: Conversion of derivative security
• E: Expiration of derivative position
• H: Expiration (or cancellation) of long derivative position with value received
• O: Exercise of out-of-the-money derivative security
• X: Exercise of in-the-money or at-the-money derivative security

Other Section 16 Exempt Transaction and Small Acquisition Codes

• G: Bona fide gift
• L: Small acquisition under Rule 16a-6
• W: Acquisition or disposition by will or the laws of descent and distribution
• Z: Deposit or withdrawal from voting trust

Other Transaction Codes

• J: Other acquisition or disposition (describe transaction)
• K: Transaction in equity swap or instrument with similar characteristics
• U: Disposition pursuant to a tender of shares in a change of control transaction