New Insider Trading Filter

There is a multitude of factors that shift market prices and cause trends to reverse. One reason is insider trading. Most people are under the impression that insider trading is illegal, and while it is a tightly regulated form of trading, it is possible to do insider trading in a responsible and legal way.

An insider is someone who has access to confidential information about a corporation and/or someone who has ownership of company stock that is equal to more than 10% of a firm’s equity. Some people that would be considered “insiders” include company executives and employees, family and friends of people employed by a company, individuals that see confidential company information in order to perform a service for the company, and government officials that see this information as a part of their job.

When a company insider is interested in making a trade of his or her company’s stock, the transaction must be reported to the SEC with advanced filings.

Insider trading is tightly regulated because, according to the SEC, it “undermines investor confidence in the fairness and integrity of the securities markets.” Making trades with insider information gives business executives and employees an unfair advantage in the market. For example, imagine that a large company is planning to release a new product to consumers, but the product launch hasn’t yet been announced to the public. Employees, then, could buy company stock knowing that this new product will dramatically increase company revenue and boost the stock price much higher than its current price.

I Know First’s new Insider Trades package gives investors predictions for stock trends of companies with recently reported insider transactions.