Reading Insider Reports on SEDI

Introduction

When the people running a public company buy or sell its shares, the law requires them to say so. In Canada those reports go into SEDI, the System for Electronic Disclosure by Insiders, where anyone can search them by company or by insider.

Insider reports are popular with retail investors, and they can be useful. They are also easy to misread. This guide explains who files, how fast, what the codes mean, and what an insider trade does and does not tell you.

The code on an insider report tells you how the shares changed hands, and that matters more than the headline number.

Who Has to Report

The main rule is National Instrument 55-104 Insider Reporting Requirements and Exemptions. It requires reporting insiders to file. According to the Canadian Securities Administrators' notice adopting the instrument, the definition covers:

• the CEO, CFO and COO, and anyone acting in a similar role;
• directors of the company, and of certain significant shareholders;
• significant shareholders, meaning holders of more than 10% of the company's voting securities;
• people responsible for a principal business unit, division or function;
• the company itself, when it holds its own securities;
• anyone else with routine access to material undisclosed information and significant influence over the company.

A junior with a small team may have only a handful of reporting insiders, which is one reason each of their reports draws attention.

How Fast They Must Report

Under National Instrument 55-104:

1. A person who becomes a reporting insider must file an initial report within 10 days, showing what they hold.
2. After that, each change in their holdings must be reported within five calendar days.

There are exemptions. For example, when a company grants stock options and files its own issuer grant report on SEDI within five days, insiders may be able to report those grants later on an annual basis. That means some option grants appear on SEDI well after the date of grant.

Reports are filed by the insider, or an agent for them, not by the company. Late filings happen, and a report can be amended. The filing date and the transaction date are shown separately, so check both.

The Transaction Codes

Every insider report carries a code for the nature of the transaction, set out in Form 55-102F6. The ones you will see most often on a junior include:

The codes change the meaning of a report completely:

• Code 10 is a trade through the exchange at the market price. A purchase under this code is an insider spending their own money at the same price any investor could pay.
• Code 16 often means the insider bought into a private placement, usually at a set price and often with warrants attached. That is real money too, but on different terms from the market.
• Code 50 is a grant of options. It costs the insider nothing at the time and is part of their pay.
• Code 51 followed by a code 10 sale can simply be an insider exercising options and selling some shares, sometimes to cover the exercise cost or taxes.
• Code 90 moves shares between accounts the insider controls, such as from personal to a holding company. Ownership does not really change.

What Insider Buying Can Tell You

An open-market purchase by a director or officer shows that a person with close knowledge of the company chose to put their own money in at that price. Several insiders buying around the same time, or a purchase that is large relative to the insider's existing holding, can be worth noting.

Context helps. Compare the price paid with the price of the company's most recent financing, and check whether the same insider also bought into that financing. Look at whether the purchase came soon after a news release, when the market had just absorbed new information, or during a quiet period. None of these turns a purchase into a forecast, but they help separate a meaningful commitment from a routine one.

It still has limits:

• Insiders may not trade on material information that has not been disclosed. National Policy 51-201 is clear that trading on undisclosed material information is insider trading. So a purchase reflects the insider's view of public information plus their judgment, not secret knowledge.
• Small purchases can be symbolic.
• Many companies set blackout periods before results or major news, so the timing of insider trades is partly mechanical.

What Insider Selling Can Tell You

Insiders sell for many reasons that have nothing to do with the company's prospects: taxes, a house, diversification, an option exercise, or estate planning. A single sale, or sales after options are exercised, usually says little. Persistent selling by several insiders over time is a different pattern and may be worth asking about.

How to Read a SEDI Report

• Look at the code first. It tells you whether the trade was in the market, in a placement, or an option event.
• Check the dates. Transaction date and filing date are separate.
• Compare size with holdings. The report shows the balance after the trade.
• Read it with the filings. Placements and option grants should also appear in news releases and financial statements. Our guides to capital structure and dilution explain how they affect the share count.
• Look for patterns, not single trades.

Insider reports are one input among many. They are not advice, and this article is general information. Read the company's filings and speak to your own adviser before making decisions.