Insider Buying and Selling: What Form 4 Filings Actually Show
Insider trading has two meanings: the legal buying and selling of a company's shares by its own officers, directors and large holders, reported to the SEC, and the illegal kind, trading on material nonpublic information. Legal insider trades generally must be reported on Form 4 within two business days.
“Insider trading” sounds like a crime, and sometimes it is. But most of it is ordinary, legal and published: executives and directors buying and selling their own company’s shares and telling the SEC within days. The filings are free to read, and a quarter of them can be counted.
How it works
The legal kind is defined by who is trading and that they report it. The SEC’s Investor Bulletin on insider transactions says the securities laws require officers, directors and holders of more than 10% of any class of a company’s securities to report purchases, sales and holdings of their company’s securities on Forms 3, 4 and 5 (investor.gov, dated 26 Jan 2021, read 25 Sep 2026).
The illegal kind is defined by what the trader knew. The SEC’s glossary describes illegal insider trading as buying or selling a security, in breach of a fiduciary duty or similar relationship of trust, on the basis of material, nonpublic information. It adds that violations can include tipping that information, trading by the person tipped, and trading by those who misappropriate it (investor.gov, Insider Trading, read 25 Sep 2026).
So the same trade can be either. A director buying shares after the company’s results are public, and reporting it, is legal insider trading. The same director buying the week before an unannounced takeover is the illegal kind, and so is a friend who buys on the director’s hint.
The three forms and their deadlines
Form 3 is the first report. When someone becomes an insider, for example on joining the board, the bulletin says they must file Form 3 within 10 days to disclose what they own.
Form 4 reports each trade. In most cases an insider who trades must file Form 4 within two business days following the transaction date.
It covers common stock and derivatives such as options, and each transaction carries a code: P for a purchase on an exchange or from another person, S for a sale, A for a grant or award from the company, M for exercising an option, F for paying the exercise price or tax with shares, and G for a gift.
Form 5 is the annual catch-up, generally due within 45 days after the company’s fiscal year ends, and only when a transaction went unreported during the year.
Rule 10b5-1 plans are the pre-arranged route. When the SEC tightened the rule in December 2022, it also required insiders filing Forms 4 or 5 to indicate by checkbox that a trade was intended to satisfy the rule’s affirmative defense, for reports filed on or after 1 April 2023 (sec.gov, press release 2022-222, read 25 Sep 2026).
A worked example
Take a hypothetical director who buys 2,000 shares at $25.00 on the open market on Monday 1 June 2026. The trade is worth 2,000 × $25.00 = $50,000, and it is reported under code P.
Count two business days forward from the trade. Tuesday 2 June is the first and Wednesday 3 June is the second, so the Form 4 is due by Wednesday. A trade on Thursday 11 June 2026 would be due by Monday 15 June, because the weekend does not count.
Now set the $50,000 against the quarter’s real figures. It is a little above the median purchase row in April to June 2026, about $42,000, and about a quarter of the median sale row, about $200,500. An open-market buy of that size is a normal insider purchase; an insider sale is typically several times larger.
The original data
The data: the SEC’s Insider Transactions Data Set for the second quarter of 2026, every Form 3, 4 and 5 filed from 1 April to 30 June 2026, downloaded from sec.gov on 25 Sep 2026. Only original Form 4s are counted here, 49,832 of them, and only their non-derivative transactions, 77,257 rows. The counts are published as a CSV of purchases against sales.
Sales outnumbered purchases by about three to one. 10,503 Form 4s reported at least one open-market sale, code S, across 2,150 companies. 3,276 reported at least one open-market purchase, code P, across 1,181 companies. By rows, S made up 27,378, or 35.4%, and P 5,220, or 6.8%.
Most rows were neither. Grants and awards, code A, were 18,950 rows, or 24.5%; option exercises, code M, 10,699, or 13.8%; and shares used to pay exercise prices or tax, code F, 9,194, or 11.9%. None of those is an insider choosing to buy or sell at the market price.
Sales are planned, purchases are not
Pre-arranged plans explain much of the selling. Of the 10,503 sale filings, 3,772 ticked the Rule 10b5-1 box, 35.9%. Of the 3,276 purchase filings, 65 did, 2.0%. Selling on a schedule set months earlier says little about what an insider thinks today.
Filing was mostly on time. Counting business days from the earliest open-market trade on each filing, 10,161 of the 10,503 sale filings, 96.7%, and 2,977 of the 3,276 purchase filings, 90.9%, arrived within two business days. That leaves 342 sale filings and 299 purchase filings later than two business days after their earliest trade.
What the bulletin says about reading them. The SEC notes that many investors believe insider purchases and sales can carry useful information about how insiders see the company, and also that insiders may sell for any number of reasons, including liquidity and diversification. Nothing in these counts measures what happened to the share prices afterward.
When it fails
The first failure is treating every insider sale as a warning. More than a third of sale filings in the quarter came from pre-arranged 10b5-1 plans, and many of the rest reflect pay, taxes or diversification. A large S row is often the least informative line on the form.
The second is treating every insider purchase as a signal. A purchase is rarer and usually uses the insider’s own money, but a small buy by one director is still one person’s decision, and nothing on this page measures whether such buys came before gains.
A third is reading non-market codes as trades. Grants, exercises, tax withholding and gifts made up more than half of the quarter’s rows. Counting them as buying or selling misreads the filing.
A fourth is assuming a late filing means wrongdoing. Some forms arrived more than two business days after the earliest trade they report, but a late report is a reporting issue, not evidence of trading on nonpublic information.
And a fifth is copying a trade you learn about late. A Form 4 can arrive two business days after the trade, and the price may already have moved by the time you read it.
Related
Form 8-K is the filing that makes company news public, which is the line between legal and illegal trading. Float explains why insider holdings are left out of the shares that actually trade. And short interest is the other public count of what traders are doing, from the opposite side.
Read the transaction code before the headline. A column of S rows from a pre-arranged plan says far less than one open-market P from a director spending their own money.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.