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

Insider trading is legal as long as it is conducted in a manner that does not exploit non-public information. To prevent illegal insider trading, regulators have established rules surrounding insider trading.

As an investor, I appreciate the rule that requires corporate officers, key employees, directors, or significant shareholders to report their insider trading to the regulator or make them publicly available, typically within a few business days of the trade.

Since I primarily invest in the American and Canadian stock markets, this article will focus on the resources that reveal when an insider needs to report their (change in) stock ownership within these countries.

Reporting Period for American Listed Companies

n the US, insiders must file an 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 filed with 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 of the different insider reporting forms (3, 4, and 5) from the SEC, click here.

Reporting Period for Canadian Listed Companies

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

Note: Please keep in mind that insiders may have many legitimate reasons for selling stock from their personal holdings. They may be selling to diversify their stock holdings or require cash for personal reasons. In fact, their insider sales may even be justified as tax loss selling at the end of the year. However, if you discover that not only one but two or more members of the management team are selling a substantial portion of their personal holdings, you should exercise caution.

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