FilingIQ Blog

Is Insider Trading Legal? It Depends Which One You Mean

Niklas Feldmann — Sun, 23 Aug 2026 00:00:00 GMT

Both answers are correct, because two different things share the name. One is a reporting duty: an officer buys shares in their own company, files a Form 4 within two business days, and the trade becomes public. The other is a fraud doctrine the courts built decision by decision, carrying up to twenty years in prison. Everything we publish comes from the first kind. That is not a loophole we found, it is the design.

The part that catches people out is what the second kind rests on. The rule that prohibits it never uses the phrase.

What makes insider trading illegal?

The prohibition lives in Rule 10b-5, and the whole rule is one sentence (17 CFR 240.10b-5):

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

One sentence, one full stop, three lettered clauses. Read it again and look for the words insider trading. They are not there. Nor is anything about material nonpublic information, corporate officers, or trading on an advantage. It is a general antifraud rule, adopted in December 1948 and last amended in 1951, and it says nothing at all about the offence everyone uses it to describe.

Congress has used the phrase, but only in headings. One section is titled “Civil penalties for insider trading” (15 U.S.C. 78u-1) and another “Liability to contemporaneous traders for insider trading” (15 U.S.C. 78t-1). Neither operative text uses it. Both describe someone who traded “while in possession of material, nonpublic information”.

A heading is not a definition, and there is no definition. The Congressional Research Service says so without hedging: “legislators have not enacted a statutory definition for the offense. Its elements are instead the product of judicial decisionmaking, with SEC rules supplementing the core prohibition” (CRS IF11966, 2021). Bills to codify one passed the House in December 2019 and again in May 2021. Neither was taken up by the Senate.

So the doctrine came from the courts, and it turns on something narrower than most people assume.

In Chiarella v. United States, decided 18 March 1980, the Supreme Court held that “a duty to disclose under § 10(b) does not arise from the mere possession of nonpublic market information”. Knowing something the market does not know is not the offence. The Court declined to recognise “a general duty between all participants in market transactions to forgo actions based on material, nonpublic information”.

In United States v. O’Hagan, decided 25 June 1997 by six votes to three, the Court accepted the misappropriation theory. In its own words, that theory “holds that a person commits fraud ‘in connection with’ a securities transaction, and thereby violates §10(b) and Rule 10b-5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information”.

Put those together and the shape is clear. The offence is a breach of duty, not an information advantage. A lawyer who trades on what a client told them has stolen something from the client. An analyst who works out the same conclusion from public filings has stolen nothing from anyone, and is doing the thing the market is supposed to do.

What makes insider trading legal?

The other kind is legal because it is disclosed, on a clock, to everybody at once.

Section 16 applies to a defined group: “Every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security … or who is a director or an officer of the issuer” (15 U.S.C. 78p). Those people may trade their own company’s stock. What they may not do is keep it quiet. A change in ownership has to be reported “before the end of the second business day following the day on which the subject transaction has been executed”.

Two business days is a hard deadline, and it is mostly met. Take every Form 4 filed in calendar year 2025, all 172,023 of them: 152,319 arrived within two business days of the transaction period the filing itself reports. That is 88.55%. The median filing takes two business days. At the other end, 7,070 took longer than five.

That figure counts corrections too. A Form 4/A filed months later to fix an earlier one lands in the data as a single very late filing, which is true but is not what the deadline is about. Counting original filings only, 151,955 of 169,468 arrived on time, or 89.67%. Our business day count also treats US federal holidays as working days, which stretches every measured gap a little. Both numbers therefore understate how well the deadline is met rather than flattering it.

For comparison, a member of Congress reporting a stock trade gets up to 45 days, and the amount they disclose is a bracket rather than a number. Same country, same year, two very different ideas of prompt.

Disclosure is the price of the trade being allowed. That is the sentence to keep.

What is the six month rule for corporate insiders?

Here is the rule that does the most work and gets the least attention. Section 16(b) says that any profit an insider realises “from any purchase and sale, or any sale and purchase, of any equity security of such issuer … within any period of less than six months … shall inure to and be recoverable by the issuer”.

Three things about that are worth slowing down for.

It does not ask what they knew. There is no mention of information, intent, or advantage anywhere in the subsection. Buy in March, sell in July at a profit, and the profit is recoverable whether or not anything improper happened. Good faith is irrelevant to it.

The money goes to the company, not the government. This is not a fine. The profit belongs to the issuer whose stock was traded.

Any shareholder can enforce it. The statute lets suit be brought “by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request”. Ask the company to sue, wait sixty days, and if it does nothing you may sue in its name. There is a two year limit from the date the profit was realised.

A rule that needs no proof of wrongdoing and that any single shareholder can enforce shapes behaviour more quietly than the headline offence does. It is also why a Form 4 buy followed by a Form 4 sale a few months later is a thing insiders and their counsel watch closely.

What are the penalties for illegal insider trading?

Civil first. The SEC may seek a penalty that “shall not exceed three times the profit gained or loss avoided as a result of such unlawful purchase, sale, or communication”. For someone who controlled the person who traded, the cap is “the greater of $1,000,000, or three times the amount of the profit gained or loss avoided” (15 U.S.C. 78u-1).

Criminal is separate and needs wilfulness. A natural person faces a fine of up to $5,000,000 and up to 20 years in prison. An entity faces up to $25,000,000 (15 U.S.C. 78ff).

Section 16(b) sits outside both. It is not a penalty at all, it is a claim the company has against its own insider.

How do you tell the two apart?

Four questions, all answerable without knowing anything about the person:

Is there a filing? The legal kind produces a document with a name, a date, a share count and a price. The illegal kind is defined by the absence of one.
Who is on the other side of the duty? Liability under the fraud doctrine runs to shareholders under the classical theory, or to the source of the information under O’Hagan. If nobody was owed anything, the fraud analysis has nowhere to start.
Was the information stolen or worked out? Reaching a conclusion from public filings is the opposite of misappropriation, even when the conclusion is valuable.
Did a purchase and a sale land within six months? That is Section 16(b) territory, and it is answered by two dates rather than by anyone’s state of mind.

This describes the rules, it is not legal advice, and a real case turns on facts no filing shows.

The practical part is that every Form 4 is public the moment it lands, and reading one is a skill rather than a subscription. Ours are indexed per person in the insider directory, our methodology page sets out what we count, and if you want to read a filing properly, start with the transaction code rather than the direction letter.

Four in Five Form 4 Filers Never Bought a Share

Thomas Kraaibeek — Sat, 22 Aug 2026 00:00:00 GMT

Of the 55,114 insiders who filed at least one Form 4 transaction dated in 2024 or 2025, 45,885 made no open market purchase in those two years. That is 83.25%, and it is a floor rather than a ceiling, for reasons set out below. Officers are the worst group, not the best.

They were filing the whole time. The letter A on a Form 4 means the share count went up, and it does not say why. Across 2026 so far, we hold 132,368 lines reporting an insider acquiring stock, and 12,554 of them carry code P, the purchase code. Most feeds surface the direction and let the reader supply the word “bought”. Our position: printing a code A grant and a code P purchase under one heading called insider buying is a category error, and it is the single most common way a Form 4 gets misread.

Every figure here comes from the 3.5 million Form 4 transactions we hold, filed between January 2015 and 21 August 2026, and was measured on 22 August 2026. The window behind each number is stated with it, because two of them are not the same window and the difference matters.

How many Form 4 filers never buy their own company’s stock?

Take every insider with at least one Form 4 transaction dated in 2024 or 2025. 55,114 people. 9,229 of them made at least one open market purchase, counting non-derivative code P rows only, which is the narrowest available reading of a purchase. 45,885 did not.

The rows lean the same way. Those two years produced 600,051 transaction rows, and 493,643 of them, 82%, came from the people who never bought. Four in five of the names moving through an insider feed are generating paperwork, not positions.

The obvious objection is that the non-buyers filed once and vanished, and that the serious insiders are hiding underneath them. Raise the bar and the figure holds. Of the 6,742 insiders with 20 or more transaction rows in those two years, 83.46% never bought. Of the 1,329 with 50 or more, 81.57%. Screening for activity does not find you buyers. It finds you people with a lot of paperwork.

Do officers buy more often than directors?

They buy less often, while filing three times as many rows at the median.

Role, 2024 to 2025	People	Never bought	Share	Median rows
Officers	28,776	24,591	85.46%	9
Directors, non-officer	22,994	18,967	82.49%	3
10% owners only	2,590	1,790	69.11%	3

Roles are assigned officer first, then director, then 10% owner, so nobody is counted twice. The table covers the 54,360 people who carry one of the three.

The natural counter is that officers are paid in stock, so grants and vesting bury whatever purchases they make. It fails on its own arithmetic. Never bought is a yes or no per person, and volume cannot dilute a yes or no. Nine median rows against three give an officer three times as many chances for one row to be a P. More filing should surface more buyers. It surfaces fewer.

One group sits apart. Among people flagged only as 10% owners, 69.11% never bought, sixteen points below the officers. Those are largely funds and holding entities rather than employees, and they are the one cohort whose stake did not arrive as pay.

What does “Acquired” mean on a Form 4?

It means the share count went up. That is all it means. Table I carries a column headed “4. Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)”. The letter in it is a direction flag. The decision sits in a different field on the same row, the transaction code, which the form defines on itself in General Instruction 8.

Code	What the form calls it	Who is on the other side
P	Open market or private purchase of non-derivative or derivative security	The market, or a private party
A	Grant, award or other acquisition pursuant to Rule 16b-3(d)	The issuer
M	Exercise or conversion of derivative security exempted pursuant to Rule 16b-3	The issuer
F	Payment of exercise price or tax liability by delivering or withholding securities incident to the receipt, exercise or vesting of a security	The issuer
S	Open market or private sale of non-derivative or derivative security	The market, or a private party

Definitions from General Instruction 8, code letters moved into their own column (SEC, Form 4); the counterparty column is ours.

An A in column 4 can come from a P, from an A or from an M. The letter cannot tell you which. Congressional disclosure loses its meaning at a different point in the document, but the failure rhymes: the amount is a bracket and the date is a deadline.

How many Form 4 acquisitions are actual purchases?

Fewer than one in ten. Every code level figure here comes from a single window, transactions dated in 2026 up to 21 August, so every share below is measured against the same set of filings.

Of the 132,368 acquisition lines in that window, 61.45% are code A, a grant or an award, and 23.93% are code M, an exercise or conversion. Code P accounts for 12,554, so 90.52% of acquisition lines record something other than a purchase. The document level gap is wider, because a filing usually bundles several lines: 91,780 filings report an acquisition and 7,952 contain a code P anywhere. That leaves 91.34% of filings showing an insider acquiring stock with no purchase in them at all.

Code A names the rule it claims exemption under, and the rule text settles what kind of event it is:

(d) Acquisitions from the issuer. Any transaction … involving an acquisition from the issuer (including without limitation a grant or award) … shall be exempt if: (1) The transaction is approved by the board of directors of the issuer, or a committee … composed solely of two or more Non-Employee Directors … (17 CFR 240.16b-3)

The conditions run past what we quoted, but the first line sets the shape: an acquisition from the issuer, signed off by the board or a committee of non-employee directors. The insider’s part was to receive it.

Code M is a different event, and money does move on it. The price field on an M line is the exercise price the insider actually pays. It is not a price they went out and met in the market that day.

Does a disposal on a Form 4 mean the insider sold into the market?

Often not, and the codes say which cases are which.

Start with the pattern that looks least like compensation. Across 2026 so far, officers and directors account for 28,330 sale days, counted once per person per date. 5,181 of those days, 18.29%, also carry an option exercise by the same person on the same date. On 82.80% of those 5,181 days the person sold no more shares than they exercised that day. That is one event wearing two rows, and a feed that prints the sale and drops the exercise has shown one leg of two.

The second pattern never reaches the market. Rule 16b-3 exempts “the disposition to the issuer of issuer equity securities” where “the terms of such disposition are approved in advance” (17 CFR 240.16b-3). To the issuer, approved in advance. That is code F: shares handed back to the company to cover the tax on a vesting event, or to pay an exercise price. Of the 124,861 filings in that window, 11,038 contain nothing but code F, which is 8.84%. Roughly one filing in eleven discloses a payroll mechanism and nothing else.

Could the real figure be higher than 83.25%?

Yes, and we publish the lower one on purpose.

Every choice in the definition points the same way. A purchase counts only as a non-derivative code P line, which is the narrowest reading available. If someone’s only activity in the window is in derivatives, they still count as a filer and they still count as not having bought. Both decisions can push 83.25% down and neither can push it up, so treat it as a floor: the share who never bought is at least that, and on a wider definition of a purchase it would be higher still.

We also quote windows rather than trends, and that is deliberate. Every code level figure here comes from 2026, stated as one window a reader can go and check. We publish no decade long trend line for insider buying, here or anywhere, because a line drawn across ten years of Form 4s mixes changes in how insiders file with changes in what they actually did, and almost nobody who publishes one separates the two.

One direction check, which is not a restatement of the headline. Across 2026 up to 21 August, 44,642 insiders filed, 4,073 bought, and 90.88% did not. That is roughly eight months against twenty four, so it gives everyone less time to buy and the two figures are not comparable. Narrow it to people with non-derivative activity and it is 89.89% of 40,276. The direction holds in both windows.

How do you read a single Form 4?

Four checks, all answerable from the document itself:

Read the transaction code before the A or D letter. The letter says which way the share count moved. The code says what moved it.
Look for a P anywhere in the filing. If no line carries one, nothing was bought on the market, whatever the summary above it says.
On a disposal, check whether every code is an F. Then the counterparty is the company and the size follows from a vesting schedule.
When a sale shares a date with an exercise, compare the share counts before reading the sale as a decision to cut a position.

Per person code histories sit in our insider directory, and our methodology page says which codes we count and which we drop. If you would rather have the feed itself filtered this way, code P and nothing else, that is what an account is for. Either way, next time you see a filing quoted as insider buying, open the original on EDGAR and find its transaction code. One letter decides whether the story survives.

A Congressional Trade Report Is a Range, Not a Number

Niklas Feldmann — Mon, 17 Aug 2026 00:00:00 GMT

When a headline says a member of Congress bought $5 million of a stock last week, two things in that sentence are not in the filing. The amount is a bracket, not a number. The date is a deadline, not a timestamp. The STOCK Act put those trades on a 30 and 45 day reporting clock in 2012. The value bands are older and separate: they come from the Ethics in Government Act of 1978, now 5 U.S.C. §13104(d), and took their present shape in 1995. Between them they define the amount and the date loosely enough that a precise-sounding headline is always an interpretation someone made.

This is not a complaint about the law. It is the shape of the data, and if you trade on congressional disclosures without knowing that shape you are reading confidence into a document that does not contain any.

What a congressional trade report actually discloses

A member of Congress files a Periodic Transaction Report when they, their spouse, or a dependent child buys or sells a security worth more than $1,000. Three parts of that regime decide how much a single report can tell you.

The amount is a band. Values are reported in ranges, not figures. The smallest band runs from $1,001 to $15,000. Higher up they widen sharply. The $1,000,001 to $5,000,000 band is $4,000,000 wide, four times its own floor, so a trade reported there could be a position worth one million or five and nothing in the filing distinguishes them.

The date is a ceiling. The report is due within 30 days of the member being notified of the transaction, and in no case later than 45 days after the trade itself. So a filing that appears today describes something that happened at some point in the previous six weeks. “Bought last week” is a guess unless the transaction date is read directly off the form, which is where it actually lives.

The name may not be the trader. Spouse and dependent-child transactions are reportable and appear under the member’s filing. A report under a senator’s name can describe an account the senator does not direct.

The routine enforcement matches the looseness. A report filed more than 30 days past its deadline draws a minimum $200 fee under 5 U.S.C. §13106(d), which the supervising ethics office can waive, and which the House Ethics Committee’s guidance says repeat late filing can increase. Larger penalties exist separately: §13106(a) lets the Attorney General sue someone who knowingly and wilfully fails to file, for a civil penalty of up to $50,000.

And the deadline is missed often. Across the 65,697 congressional transactions we hold, filed by 383 members between January 2013 and August 2026, 16.5% were disclosed more than 45 days after the trade. The median disclosure takes 28 days. So the typical filing arrives four weeks after the fact, and roughly one in six arrives past the 45-day outer limit. That is a floor on lateness rather than the whole of it: a report is also late if it misses the 30-day notification deadline, and nothing on the form shows when the member was notified, so those misses are invisible to us.

What the Stop Insider Trading Act would change

On July 22, 2026, the House passed H.R. 7008, the Stop Insider Trading Act, by 232 to 198. Sponsored by Rep. Bryan Steil, it would stop members, their spouses and their dependent children from buying individual stocks while in office. Existing holdings can be kept, and sold, but only after filing public notice of the intent to sell between 7 and 14 days beforehand. It is now with the Senate, where its path is unclear, partly because the trading ban was bundled with an unrelated voter ID provision and the vote went mostly along party lines.

Read that pre-sale notice provision again, because it inverts the whole regime. Today you learn about a trade up to 45 days after it happened. Under the bill you would learn about a sale up to 14 days before it happens. The disclosure stops being a record and becomes a signal, published while the member still holds the position.

If that passes, understanding the current data gets more important rather than less. Everything before the effective date stays bracketed and backdated, and that history is what any claim about how members trade has to be built on.

How to read a congressional trade report

The useful question is never “how much did they buy”. It is whether a disclosure is unusual against that member’s own history, which is a question about pattern rather than amount:

Compare the band to their normal band. A member who files in the $1,001 to $15,000 range twenty times a year and then files once in the $250,001 to $500,000 range has done something different. The exact figure does not matter to that reading.
Read the transaction date, not the filing date. They can be six weeks apart. Any timing claim built on the filing date is measuring the paperwork.
Check whose account it is. The form distinguishes the member, the spouse and dependent children. Coverage frequently does not.
Treat a late filing as its own data point. It is cheap to be late, so lateness is a choice.

We hold filings from 383 members of Congress going back to 2013, across 65,697 transactions, which is the only reason the pattern question is answerable at all: one filing tells you almost nothing, and a member’s full filing history tells you what normal looks like for them. The per-member views are the House and Senate trackers.

How US disclosure compares to European directors’ dealings

A German reader coming to this from Directors’ Dealings will find the American regime much looser than the one they know. Under Article 19 of the Market Abuse Regulation, a manager at a listed company reports the actual price and the actual volume, and does it within three business days of the trade. The issuer then publishes within two business days of receiving that notice. The EU Listing Act raised the default reporting threshold from €5,000 to €20,000 per calendar year and let each national supervisor set it anywhere between €10,000 and €50,000. Germany took the top of that range: BaFin moved the threshold to €50,000 by general decree, in force since 1 January 2026.

Exact figures, public inside a week, on one side of the Atlantic. A bracket in up to 45 days on the other. Any tool that presents both as the same kind of fact is flattening a real difference, and any claim that congressional disclosure is a strong transparency regime is comparing it to nothing.

Our methodology page covers how we score what comes out of these filings. If a reading of ours looks wrong, the original document is public: check us against the filing rather than against another tracker.

2 Insiders Buy $609K in CONAGRA BRANDS INC. (CAG)

Thu, 16 Apr 2026 20:35:27 GMT

Two Conagra directors bought a combined $609,000 of stock on April 14. The timing, the people, and the sizing tell a story the headline doesn't. On Monday,…

4 Insiders Buy $2.9M in IPERIONX Ltd (IPX)

Tue, 31 Mar 2026 21:26:33 GMT

Four insiders at IperionX Limited (NASDAQ: IPX) collectively purchased more than $2.1 million in company stock on March 27, 2026, according to SEC Form 4…

2 Insiders Buy $6.3M in Better Home & Finance Holding Co (BETR)

Wed, 25 Mar 2026 18:32:24 GMT

Better Home & Finance (NASDAQ: BETR) is down 70% from its September 2025 high of $94.06. The AI-powered mortgage lender went from $9.50 to $94 in six months,…

Grocery Outlet Insiders Buy $6.3M in Stock After 70% Crash

Sat, 21 Mar 2026 16:55:04 GMT

Six Grocery Outlet insiders bought $6.3M in GO shares within two weeks of a 28% stock crash. CEO Jason Potter nearly doubled his position. Full analysis of the insider buying cluster, Q4 earnings miss, and turnaround thesis.

INSPERITY, INC. Chairman of the Board & CEO Purchases $3.7M in NSP Shares

Fri, 20 Mar 2026 08:59:03 GMT

Paul J. Sarvadi, Insperity's Chairman and CEO, is doubling down on his company at a moment of significant drawdown. His $3.7M purchase of 160,000 shares…

9 Insiders Buy $45.0M in Korro Bio, Inc. (KRRO)

Thu, 19 Mar 2026 13:08:33 GMT

Nine insiders buying the same stock within a single week is rare enough to warrant attention. This isn't scattered opportunistic buying, it's coordinated…