Insider Trading FAQ: Form 4 Questions, Answered
Short, direct answers to the questions people ask most about insider trading and SEC Form 4. The guides at the end of the page go into more detail.
What is insider trading?
The term covers two different things. Legal insider trading is when officers, directors or large shareholders buy or sell their company’s stock and report it to the SEC, usually on Form 4. Illegal insider trading is trading on material information that is not yet public. InsiderHound only covers the legal, reported kind.
Is it legal for executives to buy their own company’s stock?
Yes. Officers, directors and 10% owners may buy and sell their company’s shares as long as they do not trade on material non-public information, follow the company’s trading rules and report the trade on Form 4 on time.
Who has to report insider trades?
Officers, directors and anyone who beneficially owns more than 10% of a class of the company’s registered equity securities. They report under Section 16 of the Securities Exchange Act of 1934, using Forms 3, 4 and 5.
How fast are insider trades reported?
Form 4 is due before the end of the second business day after the trade. Filings appear on SEC EDGAR shortly after they are received, so most insider trades become public within two to three days.
Where can I see insider trades for free?
On SEC EDGAR, the SEC’s free filing database: search a company or person and filter by form type 4. Many companies also post the filings on their investor relations websites.
What does code P mean on a Form 4?
Code P means an open-market or private purchase: the insider bought shares on an exchange or from another person. It is the code that insider-buying lists look for. Grants (A), option exercises (M) and tax withholdings (F) are not purchases.
Is insider buying a good sign?
It can be a useful data point, because insiders usually buy for one reason: they expect the shares to be worth more. Research has found that insider purchases have on average carried more information than sales. But insiders can be wrong, and any single purchase can be followed by a loss.
Why do insiders sell their shares?
For many reasons that say little about the company: paying taxes, diversifying, buying a home, or pre-scheduled sales under a Rule 10b5-1 plan. That is why insider sales are generally treated as weaker information than purchases.
What is a Rule 10b5-1 plan?
A written plan that lets an insider schedule future trades in advance, when they have no material non-public information. Since the 2023 SEC rules, directors and officers must wait at least 90 days before trading under a new plan, and Form 4 shows a checkbox for plan trades.
What is a cluster buy?
A cluster buy is when two or more different insiders of the same company buy its stock within a short time. On InsiderHound it means at least two insiders buying (code P) within 7 calendar days, by trade date.
Do insiders have to report gifts of stock?
Yes. Since the SEC’s 2023 amendments, bona fide gifts of securities must be reported on Form 4, within the same two-business-day deadline. They use transaction code G.
What is the short-swing profit rule?
Under Section 16(b) of the Exchange Act, an insider who buys and sells (or sells and buys) the company’s stock within less than six months must give any profit from those trades back to the company.
What is a Form 4/A?
A Form 4/A is an amendment that corrects or adds to a Form 4 that was already filed. When one appears, the original numbers may have changed, so it is worth checking both.
Do small insider purchases have to be reported right away?
Not always. Under SEC Rule 16a-6, certain small acquisitions, such as purchases of less than $10,000 within six months, can be reported later on Form 5 instead of on Form 4.
Learn more
- What is SEC Form 4? — who files, what it shows and when.
- Form 4 transaction codes explained — every code from the SEC instructions.
- What is a cluster buy? — what to check when several insiders buy.
- 10b5-1 trading plans — the 2023 rules and how to spot plan trades.
Sources: SEC Investor Bulletin: Insider Transactions and Forms 3, 4, and 5; SEC Form 4 General Instructions; SEC Rule 10b5-1 fact sheet (accessed November 9, 2026). Educational content, not investment or legal advice.