A company I consult for trades on the TSX. Am I an insider?

January 6, 2020 10:36 AM

So, I got some stock in my company, which trades on the Toronto Stock Exchange (V). I've read some really scary stuff about insider trading, and I obviously want to do everything above board. Am I an "insider" and if so, what/how to do?

Is there any form I fill out and then I can sell whenever I want? I do have ongoing knowledge of deals being done and announcements that may be made... but it's not a large amount of stock and my knowledge of this is very little.

I've googled for a few hours (!) before posting this, and I haven't found an answer to my question... although i'm probably not looking for the right words in my search.

The ideal answer would be "fill out form X before you sell, wait Y days, and sell", but any guidance and advice from Canadian friends would be extremely helpful.

I'm not Canadian, live outside Canada, and the company does not have options trading (in case this matters).

Thank you!

posted by anonymous to Work & Money (12 answers total)

This is really your employer's job to explain. Have you asked them?

My employer has some training (for new hires, then repeated every year or two) that explains the basics of insider training, along with the company's own policies.

You shouldn't have to figure this out on your own.
posted by bfields at 10:56 AM on January 6, 2020 [7 favorites]

Ask your HR department. Last time I was getting substantial stock options from a publicly traded company, the HR department said that basically it was only the Office of the President (eg: CEO, VPs, major department heads) that needed to worry about insider trading. By the time it got to us peons it was assumed to be public information.
posted by straw at 11:07 AM on January 6, 2020 [2 favorites]

Whether someone is an insider for the purposes of trading is quite complex and often based on the circumstances of the trade, who's trading, who's talking to whom, when they're doing the talking, etc. You couldn't find anything in hours on the internet because no one on the internet can answer the question in the abstract. Go talk to your HR department or Legal Department. It's also reasonably common to have dedicated people who you call to get an OK on a trade before you actually make it; see if such people exist in your company.
posted by holborne at 11:33 AM on January 6, 2020 [3 favorites]

You can look up the names and trades of the reporting insiders for your specific company at SEDI. That might clear up for you the level at which insiders must report at your particular company. Reporting insiders are normally c-suite execs or senior officers and board members who have routine access to material non-public information.

There is some nice information about who would be a reporting insider from the Ontario Securities Commission here.
posted by rdnnyc at 11:35 AM on January 6, 2020 [3 favorites]

Is there any form I fill out and then I can sell whenever I want? I do have ongoing knowledge of deals being done and announcements that may be made... but it's not a large amount of stock and my knowledge of this is very little.

I'm in the U.S. and my understanding of insider trading may be different than Canadian rules, but I think this applies across the board. As others have said, though, your company should explain the rules of the road to you when you're issued any stock. They should also have someone you can touch base with about trades. I recommend reaching out to them.

If you have material information about the company that would or could affect its share price, you should not trade. For example, if you know of a pending merger or acquisition, or that the company is about to announce something that may adversely or positively affect share price, you should not trade. Corporate officer being fired and you know before the announcement? Don't trade. Some companies also have a window of time around end of quarter and announcement of results where nobody at the company is allowed to trade, just to be safe.

Company signed a bog-standard partnership agreement with a small vendor? Just hired a senior director of sales for a small territory? Probably OK if you know about those pending announcements, but if in doubt, ask.

FWIW in the U.S. there's no form that absolves you of being an inside trader. I was on a meeting a few years ago where someone dropped some information and then said "oh, and by the way, that's material information, so none of you can trade until the next open stock sale window after we announce this quarter's results."

Doesn't matter if you're the CEO or a janitor passing by the CEO's office and overhearing material information, if you know something about your company or another company through "insider" means then you should not trade any shares - be it one or one hundred or one thousand or a million - until that information is public or otherwise no longer something that the public doesn't know that could affect share price.

I would definitely ask for the company's training on this, no matter how small the number of shares you hold is.
posted by jzb at 11:51 AM on January 6, 2020 [5 favorites]

I'm not sure what you do, but I (used to) get stock options and when I did and worked on projects that would materially impact the stock price or were media-senstive, we had to fill out specific forms that described what we could and couldn't do that included exercising options or buying additional company (or vendor) stock during specified time frames.
posted by The_Vegetables at 12:13 PM on January 6, 2020

Generally though, you are not an insider just because you are a consultant and you got some stock or some stock options, unless you are a high-ranking officer of the publicly traded company.
posted by The_Vegetables at 12:15 PM on January 6, 2020

I work in companies where every employee has access to material information (ie is an insider), and is partially compensated in company stock. We have blackout periods that our legal and financial teams put into place during which no one in the company is permitted to trade company stock (sell OR buy). If one of us wants to make a trade, we check in with reps of those departments to confirm we are *not* in blackout before making the trade.

Just ask someone on the legal team at your company.
posted by amelioration at 12:27 PM on January 6, 2020 [3 favorites]

There are insiders and there are reporting insiders.
Reporting insiders are defined by law.

Reporting insiders are generally the executives :president ,CFO ,directors, major shareholders (over 10 %}
Those reporting insiders register with SEDI, report their holdings and must report their trades , buy or sell.
They don't ask for permission to trade. They can do what they please, but must notify SEDI within 5 days of any trade
The idea is to have transparency. Anyone can check what their trades are and watch for the odd coincidences.
Only reporting insiders have to file with SEDI

You can have inside knowledge and not be a reporting insider.
You can trade , but not use inside knowledge to gain advantage.

LIke jzb said use common sense,
posted by yyz at 1:23 PM on January 6, 2020

Nth'ing as above - just ask the company's talent/HR department (or if they have an intranet I bet there will be a policy/document that explains it etc - my company has an ethics hotline and a separate independence hotline for these sorts of questions you can ring and ask questions)

Also don't forget that you may have both "actual" and "perceived" insider trading risk. You mention you have some access to information on deals etc. Maybe it's not enough (or material) to be actual insider trading, but how might others (your colleagues, business associates, family, friends) perceive the trading, especially if your investing goes really well and you make an unexpected windfall (one can dream, right)? You'll feel so much better if you'll be able to say "wow I'm glad I asked the rules around buying stock and how to do it - turns out I could buy some and it turned out super great" rather than feeling you may need to hide or it or you aren't sure if you did the right thing and mentally feel there is always an asterisk next to your investment...especially if it ends up on tax forms or other places. But sounds like you want to do the right thing, so simply ask them.
posted by inflatablekiwi at 1:42 PM on January 6, 2020

I worked at Apple many years ago. I worked on top secret products that were eventually high profile products. I was not considered an insider. I know this because there was one time why people in my group (including me) were given access to information that *was* considered "material". When we were told the information we were told that we could not trade the stock between such and such days.

Now, every company probably isn't that responsible and explicit. But generally speaking, just working for or consulting with a company doesn't make you an insider, even if you know some non-public information.
posted by Winnie the Proust at 1:44 PM on January 6, 2020

Yup, your company will know and we don't. In general I'd expect them to proactively inform you if you're an insider and tell you what days you can trade, but it can't hurt to ask just to put your mind at ease.
posted by potrzebie at 2:02 PM on January 6, 2020 [1 favorite]