Beyond Buys and Sells: Insider Trading Disclosures and Derivative Securities
Insider trading disclosures on Form 3s, 4s, and 5s are mostly known for providing important information about purchases and sales by corporate executives and insiders. However, there is a lot of additional information that can be gleaned from these filings. Form 4s have a Table II section outlining details about an insider's transactions and holdings in derivative securities. This can help provide investors with important context about insider activity, and is important given that corporate executives are being increasingly compensated in securities other than common stock. Additionally, these filings contain footnotes providing more explanation and context around trades. This information is relevant for understanding more about a trade beyond the headlines, and in some instances can reveal information that changes the interpretation of a trade entirely. The Washington Service utilizes a proprietary method for gathering information off of a filing's footnotes to provide more accurate data than services that only look at the trade itself.
In addition to Form 4s, Form 3s and 5s also can provide important information to investors. Form 3's can include information about a company that has just gone public, and Form 5s provide information on an insider who hasn't traded within a year. Please read out the FAQ for more information about the differences between these filings.
Why are these filings so important?
Insider transactions can provide important investment signals, and can be crucial for understanding if corporate executives are bullish or bearish regarding their own stock. The context provided on these filings can help investors distinguish between, for example, sales for compensation versus insiders frantically bailing out of their stock before it drops. Table II information also helps to illuminate a fuller picture of an insider's compensation, which can otherwise happen under the radar. The Washington Service helps to provide the full picture with the most robust Table II data of any insider trading data and analysis provider.
[Please see our FAQ for more information about how to interpret filings]
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