Explainer · Earnings & Analyst Ratings
Insider buying and selling: Form 4 explained
When a company's directors, officers or biggest shareholders buy or sell its stock, they have to tell the SEC within days. Those reports, mostly on Form 4, are public, and they are easy to misread.
Quick answer
Form 4 is the report a company insider (a director, an officer or a holder of more than 10% of a class of its stock) files when their holdings change. It is due within two business days of the trade [3] and is public on the SEC's EDGAR website [3].
Key points
- Insiders are directors, officers and holders of more than 10% of a class of a company's registered stock [2].
- Form 3 is the first report, Form 4 reports changes within two business days, and Form 5 is an annual catch-up [1] [3].
- The transaction code matters: P is an open-market purchase, S a sale, while A, M, F and G are grants, option exercises, tax withholding and gifts [3].
- Insiders may sell for many reasons, including liquidity and diversification, so a sale on its own is not a verdict on the company [3].
- Legal insider buying and selling is different from illegal insider trading, which means trading on material, nonpublic information in breach of a duty [8].
On this page
What is a Form 4?#
A Form 4 is a short public report that says an insider's ownership of a company's stock has changed. Under SEC rules, initial ownership goes on Form 3, changes in ownership go on Form 4, and annual statements go on Form 5 [1].
The rules come from Section 16 of the Securities Exchange Act. It covers the directors and officers of an SEC reporting company, plus anyone who owns more than 10% of a class of its registered equity securities [2]. These people must report most of their transactions in the company's stock within two business days [2].
The SEC says Forms 3, 4 and 5 are publicly available through its EDGAR website [3], and EDGAR itself is free to use [4]. If a stock page shows an "insider transactions" table, the filing on EDGAR is the original record to check it against.
Who has to file Forms 3, 4 and 5?#
Three groups count as insiders for this purpose: officers, directors, and holders of more than 10% of any class of a company's securities [3]. A new director files Form 3 within 10 days of becoming an insider [3], and from then on files a Form 4 each time a reportable change happens.
The list has grown recently. A law signed on December 18, 2025, the Holding Foreign Insiders Accountable Act, extends Section 16(a) reporting to directors and officers of foreign private issuers with registered equity, effective March 18, 2026 [5].
The three forms do different jobs. The table below compares them; the deadlines are the ones in the SEC rule text and the SEC's investor bulletin.
| Form | What it reports | When it is due |
|---|---|---|
| Form 3 | Initial ownership when someone becomes an insider | Within 10 days of becoming an insider |
| Form 4 | A change in the insider's holdings, such as a purchase, sale or gift | Before the end of the second business day after the trade |
| Form 5 | Annual statement of holdings and transactions not reported before | Within 45 days after the fiscal year end |
How do you read a Form 4 transaction code?#
Each line on a Form 4 carries a one-letter code that says what kind of transaction it was. This is the single most useful field for a beginner, because many insider "sales" and "acquisitions" are routine pay mechanics rather than decisions to buy or sell in the market. The SEC's investor bulletin lists the codes [3]. The six you will see most often:
| Code | SEC description | What it usually means for you |
|---|---|---|
| P (purchase) | Purchase of securities on an exchange or from another person | The insider spent money to buy shares |
| S (sale) | Sale of securities on an exchange or to another person | The insider sold shares; the reason is not given by the code |
| A (grant or award) | Grant, award, or other acquisition of securities from the company | Pay in stock or options, not a market purchase |
| M (exercise) | Exercise or conversion of a derivative security received from the company | An option was turned into shares |
| F (tax or price payment) | Payment of exercise price or tax liability using securities received from the company | Shares withheld to cover tax or the exercise price |
| G (gift) | Gift of securities by or to the insider | Shares given away or received, no sale price |
Code descriptions quoted from the SEC investor bulletin [3]. The last column is our plain-English reading.
When are insider trades reported and what is a 10b5-1 plan?#
The rule is precise: a Form 4 must be filed before the end of the second business day after the day the trade was executed [1]. So by the time you read about an insider sale, it has already happened, often a day or two earlier.
Some trades are set up months in advance under a written trading plan known as a Rule 10b5-1 plan. Since the SEC's December 14, 2022 amendments, people other than the company itself must wait through a cooling-off period before trades under a new plan can start [6]. For directors and officers it is the later of 90 days after adopting the plan or two business days after the company discloses its financial results, with a maximum of 120 days [7]. For other persons it is 30 days [7].
The Form 4 tells you when a trade was made under such a plan: filers must tick a checkbox if a transaction was intended to satisfy the rule's conditions [6]. The same amendments moved bona fide gifts from Form 5 onto Form 4 [6], so gifts now appear on Form 4 as code G lines.
For example, if a hypothetical officer adopted a plan on March 2, 2026, 90 days later is May 31, 2026 and the 120-day cap is June 30, 2026 (calculated), so the cooling-off period would end between those two dates, depending on when the company disclosed its financial results.
Does insider selling mean the stock will fall?#
Not necessarily, and the SEC says so directly: insiders may sell company securities for any number of reasons, including liquidity and diversification [3]. An insider who receives shares as pay (code A lines) may sell some of them simply to raise cash or spread their wealth around. Under the current rule, trades under a new 10b5-1 plan can start only after a cooling-off period [7], which makes such a sale even weaker as a signal about today's news.
Open-market purchases (code P) are different, because the insider is spending their own money. Even so, no source we cite shows that insider buying predicts future prices, so treat it as one more fact to research, not a reason to act.
How do you find Form 4 filings for a company?#
You do not need a paid service. EDGAR gives free public access to company filings [4], and you can search it by company name or ticker symbol [4]. Our guide to SEC filings: 10-K, 10-Q and 8-K explains the other forms you will see in the same list.
- Search EDGAR
Type the company's name or ticker into the EDGAR search bar and open its filing list.
- Filter for Form 4
Narrow the list to Form 4 (and Form 3 or 5 if you want the full picture) and sort by date.
- Read who filed
Check the reporting person's name and relationship: director, officer or 10% owner.
- Read the code, then the numbers
Look at the transaction code first. Only then look at shares, price and the holdings left after the trade.
- Check the 10b5-1 box and footnotes
See whether the trade was under a plan and read the footnotes, which may explain withholding, gifts or weighted average prices.
Some stock quote pages also show an insider transactions tab. If you use one, look for the transaction code there too, so grants and tax withholding are not mistaken for market trades.
Mistakes beginners make with insider trading forms#
- Counting every line as a sale
Code F lines are shares withheld for tax or exercise costs and code G lines are gifts [3]. Neither is a market decision to sell.
- Reading one sale as a warning
Insiders sell for liquidity and diversification [3]. Look at the size of the sale relative to what they still hold and whether it was planned.
- Assuming the news is fresh
The filing can arrive up to two business days after the trade [1], and the price may have moved since.
- Confusing big holders with funds
A 10% owner files Form 4 [2]. Managers with $100 million or more in 13(f) securities report holdings quarterly on Form 13F [9]. See institutional ownership and 13F filings.
Frequently asked questions#
How long does an insider have to file a Form 4?
Before the end of the second business day after the day the trade was executed [1].
Are Form 4 filings free to see?
Is it illegal for executives to sell their own company's stock?
No. Insiders can buy and sell, but they must report it. It becomes illegal insider trading when someone trades in breach of a duty of trust while holding material, nonpublic information [8].
What does the 10b5-1 checkbox on a Form 4 mean?
It shows that the insider says the trade was intended to satisfy the conditions of Rule 10b5-1, meaning it was made under a pre-arranged trading plan [6].
The bottom line#
A Form 4 tells you that an insider's holdings changed, when, by how much and how. Read the transaction code before the numbers, check whether the trade was planned under Rule 10b5-1, and compare the sale with what the insider still owns. Treat insider activity as one input among many, never as a buy or sell signal on its own. Pair it with the company's earnings reports and read our risk disclosure before making any decision.
Sources
- 17 CFR 240.16a-3 Reporting transactions and holdings.
- SEC.gov | Officers, Directors and 10% Shareholders.
- Updated Investor Bulletin: Insider Transactions and Forms 3, 4, and 5.
- Using EDGAR to Research Investments.
- Holding Foreign Insiders Accountable Act Frequently Asked Questions.
- SEC Adopts Amendments to Modernize Rule 10b5-1 Insider Trading Framework.
- 17 CFR 240.10b5-1 Trading on basis of material nonpublic information in insider trading cases.
- Insider Trading.
- Form 13F -Reports Filed by Institutional Investment Managers.
Education only. This page is not investment, tax or legal advice. Stocks can lose value. See our risk disclosure.
