Insider Trading Rules – When do Insiders Need to Report Their (Change in) Stock Ownership

Insider trading is legalas long as this trading is done in a way that does not take advantage of non-public information. In order to prevent illegal insider trading the regulators have adopted some insider trading rules.

As an investors, I appreciate the insider trading rule which oblige corporate officers, key employees, directors or significant shareholders to report their insider trading to the regulator or to have them publicly disclosed, usually within a few business days of the trade.

As I primarily invest in the American and Canadian stock markets, I will limit the scope of this article to the resources which reveal when an insider needs to report their (change in) stock ownership within these countries.

Reporting Period for American Listed Companies

In America an insider is required to file its initial filing on Form 3 within 10 days of becoming an officer, director, or beneficial owner. Changes in insider stock ownership are reported on Form 4 and must be reported to the SEC within two business days. Insiders must file a Form 5 to report any transactions that should have been reported earlier on a Form 4 or were eligible for deferred reporting. If a Form 5 must be filed, it is due 45 days after the end of the company’s fiscal year. For a more detailed explanation about the different insider reporting forms (3, 4 and 5) from the SEC you can click here.

Reporting Period for Canadian Listed Companies

In Canada an insider is required to file an initial insider report on SEDI within 10 calendar days of becoming a reporting insider. Thereafter, an insider must file an insider report within 5 calendar days of any change in stock ownership.

Note: Please keep in mind that insiders can have many acceptable reasons why they are selling stock from their personal holdings. They may be selling to diversify their stock holdings or they may need the cash for personal reasons. Heck, their insider sales can even be justified as tax loss selling at the end of the year. However, when you ascertain that not only one, but two or more members of the management team are selling a substantial part of their personal holdings, you should become very cautious!


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