What Is Section 16?

Section 16 of the Securities Exchange Act of 1934 is the framework that makes insider trading visible. It requires a defined set of corporate insiders to publicly report their holdings and every change in them, and it claws back certain short-term trading profits. Almost every filing InsiderAlpha tracks exists because of Section 16.

Who is a "Section 16 insider"?

• Directors of the issuer.
• Officers with policy-making authority (CEO, CFO, president, principal accounting officer, and similar).
• 10% beneficial owners of any class of registered equity.

The three Section 16 forms

• Form 3 - initial statement of ownership, filed within 10 days of becoming an insider. It's the "starting balance."
• Form 4 - the workhorse: filed within two business days of any transaction. See our Form 4 guide.
• Form 5 - annual catch-up for small or exempt transactions that weren't required to be reported earlier.

The short-swing profit rule (Section 16(b))

Section 16(b) requires insiders to disgorge any profit from a purchase and sale (or sale and purchase) of the company's stock within any six-month window - regardless of whether they actually used inside information. The rule is mechanical and strict, which is why you rarely see an insider buy and then quickly sell: the profit would simply be forfeited to the company.

Why this matters for investors

Because Section 16 forces fast, standardized, public disclosure, outside investors get a near-real-time view of insider conviction. The short-swing rule also means an insider's open-market purchase is a genuine multi-month commitment - they can't flip it without giving back the gains. That's part of why insider buying carries signal.

Browse the latest Section 16 filings → · What is Form 4? →

This article is informational and is not investment advice.