What is a corporate insider?
TL;DR
A corporate insider is a company’s officer, director, or 10%+ owner (SEC Section 16). Insiders are allowed to trade their own company’s stock — legally — but they must report every trade on Form 4 within two business days. What’s illegal is trading on material non-public information in breach of a duty. Those public Form 4 reports are exactly what HoldLens reads to track insider buying and selling.
A corporate insider is someone with a formal relationship to a public company that gives them a duty to its shareholders: its officers, directors, and beneficial owners of more than 10% of a class of its stock.
The three core insiders (Section 16)
- Officers — CEO, CFO, president, principal accounting officer, and other policy-making executives.
- Directors — every member of the board.
- 10%+ beneficial owners — any person or entity holding more than 10% of a registered class of the company’s equity.
These are statutory insiders under Section 16 of the Securities Exchange Act of 1934. They carry ongoing reporting duties whether or not they ever trade on inside information.
Temporary insiders
The securities laws also treat outsiders with a fiduciary duty and access to material non-public information as insiders for trading purposes — company lawyers, investment bankers, accountants, and consultants. If they trade on what they learn through that relationship, the same insider-trading rules apply.
What insiders must report
Section 16 insiders file three SEC forms:
- Form 3 — initial statement, filed when someone first becomes an insider.
- Form 4 — filed within two business days of any change in ownership: a buy, a sale, an option exercise, or a grant.
- Form 5 — an annual catch-up for certain deferred or exempt transactions.
Form 4 is the one that matters for signal: a near-real-time, public record of what the people who run the company are doing with their own money. See Form 4 vs 13F for how insider filings differ from institutional ones.
Legal vs illegal insider trading
A common misconception is that “insider trading” is always illegal. It is not. Insiders buy and sell their own stock constantly, and it is perfectly legal — as long as they are not trading on material non-public information (MNPI) in breach of a duty, and they disclose the trade on Form 4. Many insiders use a Rule 10b5-1 plan — a pre-scheduled trading plan set up in advance — which provides a legal defense by removing their discretion over timing.
Illegal insider trading is the narrower act of trading on undisclosed material information while owing a duty to keep it confidential.
Our view
Not all insider trades carry equal information. A scheduled 10b5-1 sale by a CFO is mostly noise — diversification, tax bills, option expiries. An open-market, discretionary purchase, especially when several insiders at the same company buy within days of each other, is the rarer and more interesting event: insiders almost never have to buy, so when they choose to, it reflects a view.
That is why HoldLens’s InsiderScore weights trades by the insider’s role, by whether the transaction was a discretionary buy or a routine sale, by recency, and by clustering — rather than counting every Form 4 the same. The goal is to separate the handful of meaningful signals from the thousands of mechanical filings.
Foundational reading on securities analysis
Insider filings are one input among many. The books below are where disciplined investors learned to weigh evidence — Graham, Lynch, Munger.
Bookshop.org affiliate links — HoldLens earns a 10% commission if you buy, at no extra cost to you. Bookshop.org is the indie-bookseller consortium that supports local bookstores. These are the books we actually recommend. Always do your own research.
Not investment advice. Definitions summarized from SEC Section 16 and SEC Form 3/4/5 guidance; verify against the primary sources linked above. See methodology for how we parse and score every filing.
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Track insider trades live on HoldLens
Form 4 insider firehose — every CEO/CFO/director trade, scored by role, action, and clustering on the InsiderScore. Recent insider activity. Related explainers: Form 4 vs 13F, how InsiderScore works, congressional trading.