Section 16
Section 16 of the Securities Exchange Act of 1934 governs insider reporting and trading. It requires officers, directors, and 10% beneficial owners to report their transactions and prohibits short-swing profits from round-trip trades within six months.
The Trader's Take
The Signal
Section 16 creates the framework that makes insider trading data transparent and actionable. All Form 3, 4, and 5 filings are required under Section 16(a).
The Noise
The reporting requirements themselves don't create signals—the actual transactions do.
Actionable Insights
- 1All insider transactions you see on the dashboard are required by Section 16(a).
- 2Section 16(b) prevents insiders from quick trading, making their buys more meaningful.
- 3Understanding Section 16 helps you know which insiders must report and when.
Regulatory Context & Context
Common Misconceptions
Section 16 doesn't apply to all shareholders—only officers, directors, and 10% owners.
The six-month rule applies to any round-trip, not just profitable ones.
Frequently Asked Questions
Who is subject to Section 16?
Officers, directors, and any person who owns more than 10% of a class of equity securities of a publicly traded company.
What is Section 16(a)?
The reporting requirement that mandates insiders file Form 3, Form 4, and Form 5 to disclose their transactions.