Canadian Insider Trading Reports
Before buying or selling a stock it is always useful to
know if insiders have been buying or selling.
Canada has an accessible internet
based system where individual investors can access insider trading reports on a
The System for Electronic Disclosure by Insiders is known a
SEDI and was implemented by the various Canadian provincial security regulators.
SEDI can be accessed at
SEDI has been described as somewhat clunky to navigate. To
search for insider trades by company (security issuer, in SEDI's jargon) go to
For insider trading reports, click the link above and then choose "view
summary reports" then choose "insider transaction detail" and hit "next".
Then in the first field choose "issuer name" and enter the name of the company. It will normally be appropriate to
enter a range of dates such as the last six months. Then scroll down to "Equity"
and click "select all". Then scroll to the bottom and click "search" and your
report will be generated.
For Insider holdings reports, click the link above, then choose view summary
reports, then choose "insider information by issuer", then enter the company
name. It is not necessary to choose a date range since the default is to show
all insiders as of today.
Currently, the regulations call for insider trades to be
electronically reported within 10 days of the trade.
Insiders are typically prevented from trading during
certain periods. I understand that this includes the period from the end of a
quarter, until the earnings are released.
Insiders are not allowed to trade on "material" inside
information that has not been made public. This is something of a farce, in my
opinion, because insiders are always in possession of non-public
information that I would call material. However, the regulators have set the bar
for what constitutes, materiality, very high. Generally, insiders are not
challenged by the regulators unless they trade in advance of very major news
such as merger and acquisition activity or closure of plants and divisions. It
is precisely because insiders do have some inside information, whenever they
trade, that I believe that their trading actions can provide signals as to
whether insiders think the share price is going to rise or fall.
Analysis of Insider Trading Data
One of the most common trade types you will see is when
insiders have exercised options. Most often they immediately sell all of the
acquires shares. This is not necessarily a negative signal. They typically need
to sell some shares to cover the income taxes payable on the share exercise. I
consider it a positive signal when insiders exercise options and then hang onto
most or all of the acquired shares.
Another common insider trade is the acquisition of shares
"under a plan". In many cases the company is paying for these shares and they
are bought on a regular monthly basis. I don't take this as a positive indicator
since it tends to be a brainless monthly purchase, not dependent on where the
insiders think the share price is going.
Sometimes the principal owner will be selling shares under
a plan. Typically they continue to hold thousands of shares. Directionally, I
have to consider this a negative signal. But I would not over-react to this if
other signals wee positive. All kinds of excuses are given for this type of
selling, such as estate planning, the need to diversify and a need for cash. So,
it is not necessarily an indication hat the principal owner thinks the shares
are over-valued, but I still have to consider it to be directionally a negative
If numerous insiders are selling, then that is clearly a
very negative indicator.
If numerous insiders are buying (other than small amounts,
"under a plan"), then that is clearly a positive indicator.
Shawn Allen, CFA, CMA, MBA, P.Eng.
President, InvestorsFriend Inc.
November 29, 2003