Insider data uses a specific vocabulary drawn from securities law and from market practice. Some terms are legal and precise, others are informal labels that researchers and websites use. The definitions below are plain language explanations of the terms used on this site. They are summaries, not legal advice, and the official rules and the filings themselves control if there is ever a conflict.
Form 4 is the statement of changes in beneficial ownership that certain insiders must file with the SEC when they buy, sell, receive, or otherwise change their holdings in their company equity. It is the main source document for the trades shown on this site.
Section 16 is the part of the Securities Exchange Act of 1934 that covers reporting by insiders of public companies. It requires the filings, sets the short swing profit rules, and is the reason Form 4 exists.
Reporting person is the individual or entity whose ownership changed and who signs and files the form. On most Form 4 filings the reporting person is the officer, director, or large owner personally, even if the shares are held through a trust or fund they control.
Beneficial owner means a person who has or shares voting power or investment power over shares, even if the shares are legally held in another name. Beneficial ownership is broader than record ownership, which is why a filing can list shares held by a spouse or trust.
Officer, director, and ten percent owner are the three groups who must file. Officers are the executives the board designates as Section 16 officers, directors are board members, and a ten percent owner holds more than ten percent of a class of the company equity securities.
Direct ownership means shares held in the insider own name or account, marked with a D on the form. Indirect ownership, marked I, means shares held through another person or entity, such as a spouse, a family trust, a partnership, or a retirement plan, where the insider still has a beneficial interest.
Derivative security is a security whose value depends on the underlying stock, most commonly stock options, but also warrants, convertible notes, and some appreciation rights. Form 4 reports derivatives in Table II and non-derivative shares, meaning the stock itself, in Table I.
Transaction codes are the single letters that describe each event. The most useful are P for an open market or private purchase, S for an open market or private sale, A for a grant or award, M for an option exercise or conversion, G for a gift, F for shares withheld or sold to pay taxes or an exercise price, and C for a conversion of a derivative security.
Cluster buy is an informal term, not a legal one, for purchases by several different insiders at the same company within a short period, often a few weeks. Researchers watch for clusters because agreement among several insiders is harder to explain by personal reasons alone than a single purchase.
10b5-1 plan is a written trading plan adopted under SEC Rule 10b5-1 that sets future trades in advance, by date, amount, or formula, at a time when the insider does not have material nonpublic information. Trades under a plan appear on Form 4 like other trades, and footnotes often disclose the plan.
Blackout period is a window set by a company own policy, often around earnings announcements, when insiders are not permitted to trade. Blackout periods explain why insider trades bunch after earnings and disappear before them.
Open market purchase means the insider bought shares through the market at the prevailing price with their own money, as opposed to receiving them as pay. Short swing profit refers to the Section 16 rule that can require an insider to return profits from a purchase and sale, in either order, within less than six months.
This glossary is educational material only and is not investment advice or legal advice about any filing or trade.