Insider trading is the act of trading as a corporate insider, or a major owner (10%) of a company based on access to information that is not available to the public, and only to certain individuals.
Since the Securities Exchange Act was enacted in 1934 by the Securities Exchange Committee (SEC), corporate insiders are required to publicly disclose their stakes, ownership and any transactions of the company they have a position in. Corporate insiders; directors, C-level officers, and major owners (10%) of stock have access to information that is unavailable to the public and for the fairness of other investors, are not allowed to act (buy or sell shares) on this information until it is released to the public.
Corporate insiders report via several forms. Form 3 is the initial report of an insider’s stake in a company. Form 4 is for disclosure of any transactions or options exercising, and Form 5 is a summary of all year trading activity.
TipRanks automatically collects all forms of all insiders and presents and summarizes the information on stock pages in TipRanks, and measures individual insiders performance as traders. See Microsoft or Bill Gates for reference.