Is insider trading legal? Insiders buying their own stock versus trading on secret information

One name, two meanings

Newspapers use "insider trading" for crimes. The securities rules use "insiders" for people who must report. Both are real, and they overlap only when someone trades on information that was not public.

The legal kind: trading and reporting

Officers, directors and owners of more than 10% of a listed company may buy and sell its shares. Section 16(a) of the Exchange Act makes them report each change in ownership, before the end of the second business day after the trade, and the SEC's investor bulletin describes the Forms 3, 4 and 5 used. The same bulletin notes that insiders may sell company securities for any number of reasons, including liquidity and diversification. A filed Form 4 is the lawful, public record of an ordinary event.

The illegal kind: trading while aware

Rule 10b-5 makes it unlawful, in connection with the purchase or sale of any security, to use a device or scheme to defraud, to make a materially untrue or misleading statement, or to engage in an act that operates as a fraud or deceit. The rule never uses the phrase "insider trading". The offense was built from that text by court decisions.

Rule 10b5-1 adds one definition. A purchase or sale is "on the basis of" material nonpublic information if the person was aware of the information when making it. The rule states that the law of insider trading is otherwise defined by judicial opinions construing Rule 10b-5.

Two points follow from the text. The prohibition is not limited to executives: Section 21A of the Exchange Act refers to "any person" who purchases or sells while in possession of material nonpublic information or who communicates it. And the civil penalty set out there is determined by a court and cannot exceed three times the profit gained or loss avoided, as the statute says.

Where trading plans fit

Rule 10b5-1(c) gives an affirmative defense to a person who, before becoming aware of the information, entered into a binding contract, gave instructions or adopted a written plan to trade. Since the SEC's 2022 amendments, Form 4 has a check box for trades made under such a plan. The article on Rule 10b5-1 plans covers what the box does and does not show.

A separate rule: short-swing profits

Section 16(b) is not insider trading law. It says any profit an officer, director or 10% owner makes from a purchase and sale, or sale and purchase, within a period of less than six months is recoverable by the company, irrespective of any intention. It applies whether or not the person knew anything confidential. The statute lets the company, or a shareholder on its behalf, sue to recover it.

Members of Congress

The STOCK Act states that Members of Congress and employees of Congress are not exempt from the insider trading prohibitions in the securities laws, including section 10(b) and Rule 10b-5. It also affirms a duty of trust and confidence owed with respect to material nonpublic information gained from the position. See Public Law 112-105 and our article on what the STOCK Act requires.

What a Form 4 can and cannot show

A filing is a public record of a transaction, and nothing in it is an accusation. In the 90 days to 9 October 2026, counted on 9 October 2026, OQRO stored 2,417 insider open-market purchases and 13,250 insider open-market sales, every one of them a reported transaction. Whether any particular trade was made while aware of confidential information is for a regulator or a court to decide, not for a data page.

How OQRO treats the question

OQRO lists each filing with a link to the original, keeps plan-based sales apart when a footnote or the box says so, and states no view of motive. The guide to the Form 4 lists the fields.