Canadian Insider Trading Reports
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 timely basis.
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 https://www.sedi.ca
SEDI has been described as somewhat clunky to navigate. To search for insider trades by company (security issuer, in SEDI’s jargon) go to https://www.sedi.ca/sedi/SVTReportsAccessController?menukey=15.03.00&locale=en_CA
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 indicator.
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