Insider reporting is vital to maintain transparency with investors, compliance with the SEC, and to avoid hefty fines. Unfortunately, for many new insiders, the complexity of insider filing and reporting can lead to costly mistakes. To help you avoid these pitfalls, here are some common mistakes to avoid when it comes to insider reporting. Keep these common mistakes of insider reporting in mind if you want to avoid costly penalties and a potential loss of investors.

Not Disclosing a Trade Quickly Enough

The SEC requires that all trades by insiders must be disclosed within two business days after the trade is executed. These trades should be made through Section 16, Form 4, and filed with the SEC. This is necessary to ensure transparency for investors that rely on this information when making decisions about the company they are investing in. Failure to disclose a trade quickly enough can result in hefty fines from the SEC.

Form 4 is used to report any changes in the holdings of company insiders. Form 4 is a two-page form that includes information such as:

• Name and address of reporting person
• Title of the security
• Transaction date
• Issuer name with the ticker or trading symbol
• Relationship of reporting person to issuer (i.e., how are you an insider, director, officer, or 10% stockholder)
• Number of derivatives
• Prices of derivatives
• and more

While it sounds like a lot of information to include, the form itself is quite legible and allows insiders to file easily within the two-day period following the close of day at the exchange. However, if this disclosure is not done in a timely manner, the SEC can penalize you with hefty fines.

Insider Trading

Insider trading is illegal and strictly prohibited by the SEC. It refers to any buying or selling of company securities while in possession of material non-public information about the company’s performance or future prospects. Insider trading can be as innocent as a family member or friend asking you about the company’s performance, to more serious issues such as using non-published quarterly filings you acquired as an employee to make a sale.

Other examples of insider trading to keep in mind include:

• Tipping off family, friends or colleagues about material non-public information to help them make decisions on buying and selling securities
• Trading on behalf of a third party using material non-public information you possess as an insider
• Engaging in trading based on non-published news stories or analyst reports before they are officially released.

By far, one of the biggest mistakes people make is engaging in insider trading and failing to disclose information. You must always disclose all material non-public information before making any trades and abide by the SEC’s rules and regulations.

Not Filing Online

The SEC's Electronic Data Gathering Analysis and Retrieval System (EDGAR) is the only way to electronically file disclosures for insider activity with the SEC. Filing online is fast, easy, and much more efficient than filing by paper. You must use EDGAR when filing any forms related to trading activity or changes in your holdings as an insider through Section 16, Forms 3, 4, and 5. While you can easily find hard-copy forms online, you can only remain compliant with the SEC by filing electronically.

Not Updating the Company Website

The SEC also requires that companies have an updated webpage with insider information available to the public. This page should include information about the company’s ownership structure and all insider trading activity, including any Form 4 filings. Companies must also update this page regularly, so it's important to make sure you are regularly checking for new or changed filings as well as updating any changes in the company’s ownership structure. For instance, when a new insider is positioned in the company, they'll be required to file Section 16, Form 3. Form 3 is used to report the initial holdings of the company insider.

Remaining Compliant and Trustworthy

By remaining up-to-date on all your insider trading and disclosure filings, you can ensure that you remain compliant with the SEC and avoid hefty fines or other penalties. By understanding and avoiding common mistakes related to insider trading, you can help keep yourself and your company compliant with the SEC's rules and develop a good reputation among investors as well.

For those that have trouble filing on time, there are many tools available to make the process easier. Third-party services like Form345.com can help you stay compliant and make sure all your filings are reported quickly and accurately, freeing up time for you to focus on other important tasks. SEC filing services are critical for any company that needs to remain compliant with the SEC, and they can help you save money and time in the long run.