Section 16 Insider Trading

Section 16 of the 34 act governs the sale or transfer of securities by insiders of the corporation.

Section 16 insider trading. Insiders must generally register with the sec an indicate their ownership interest at the time of filing the registration statement or within 2 days of becoming an insider i e acquiring a large ownership of shares. If an officer a director or a large 10 or more shareholder of a public corporation realizes a profit from buying and selling stock within a six month period section 16 b of the securities exchange act of 1934 the act authorizes the corporation to recover from such statutory insider any so called short swing profits. An insider is an officer director or large shareholder holding 10 or more of outstanding securities.

Insider trading and section 16 reporting page 5 non public inf ormation. The short swing profit rule comes from section 16 b of the securities exchange act of 1934. Section 16 b if at first you don t succeed.

The highest sale price will be matched against the lowest purchase within that period to determine if the insider received s hort swing profits this formula can result in deemed profits even if the insider lost money on the transactions. The rules under section 16 require these insiders to report most of their transactions involving the company s equity securities to the sec within two business days on forms 3 4 or 5. Section 16 is a rule within the securities exchange act of 1934 sea that articulates the regulatory filing responsibilities that directors officers and principal stockholders are legally.

The debentures need not be reported unless they are also deemed to be equity securities as would occur for example if they were convertible into common stock. If for any reason the trade is not completed within two business days pre clearance must be obtained again before stock may be traded. Phillip goldstein is the co founder of bulldog investors.

Section 16 of the securities and exchange act of 1934 requires that when an insider defined as all officers directors and 10 owners buys the corporation s stock and sells it within six months all of the profits must go to the company. The form below allows the user to calculate a corporate insider s short swing profit liabilities under section 16 b of the securities exchange act of 1934 15 u s c. If upon requesting clearance you are advised that company stock may not be traded you may not engage in.

An insider who purchases units consisting of common stock and debentures of the insider s company must file a section 16 a report covering the acquisition of the stock. 78p b and to retrieve potentially relevant insider trading data from documents filed with the securities and exchange commission.