Give me a break. I know what 144 stock is.
Here are two other definitions-- and if you are not an insider than you own more than 10% or are Reg D-- who are privy to a LOT more info than street investors-- so don't try to con me. I have been a Reg D investor.
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From the SEC via Edgar:
From edgar-online.com
Definition of Form 144 and Its Use
This form must be filed by "insiders" prior to their intended sale of restricted stock (issued stock currently unregistered with the SEC). Filing this form results in each seller receiving an automatic exemption from SEC registration requirements for this one transaction. A Form 144 is NOT an EDGAR electronic filing; each 144 is filed by the seller in paper during the day at the SEC. EDGAR Online adds all of the current day's 144 paper filings to our electronic database at the END of each business day.
The value of the EDGAR Online end-of-day listing of 144s is that the first notification of a 144 filing sometimes is the precursor of other 144 filings. 144 sales frequently come in clusters caused by events such as the end of a "lock-up" period or stock options being exercised and can be used to successfully project the onset of increased "sell side" activity in the stock of the target company.
Other uses of 144s include targeting individuals who will be coming into money and may wish to deploy such funds. Thus this timely information is the source of myriad business intelligence uses.
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insidertrader.com
Insider Definitions
An Insider:
According to the Securities Exchange Act of 1934, an insider is defined as an officer or director of a public company, or an individual or entity owning 10% or more of any class of a company's shares. The definition in all its legal speak is given in Section 16 of the 1934 Act. There are further words sparred on how more specifically to define an "officer" and "beneficial owner" in Rule 16a-1 of the Code of Federal Regulations. Though both are lovely pieces of prose, be content with the knowledge that the definition of an insider is intended to cover the people who have the most knowledge of the inner workings and future prospects of a publicly traded company.
Once pegged as an insider, the SEC becomes very interested in how the person may be benefiting from the unfair advantage they presumable have when trading their own companies' shares. Insiders must make an initial statement of holdings via the SEC's Form 3 within 10 days after gaining their insider status.
Subsequent changes in ownership must be reported to the SEC on a Form 4 by the 10th day of the month following an insider's trade. Any trade by an insider in the month of January, for instance, must be reported to the SEC by February 10. To guard against any funny business just before becoming an insider, trades made up to six months prior to achieving the status must also be reported on a Form 4 soon after filing the Form 3. Filing requirements linger on for another six months after insiders lose their status as well. This helps stop abuses such as a director giving up his seat on a company's board just in time to buy as much stock as possible before an imminent merger.
The SEC's nosiness doesn't stop there. Insiders must also file a Form 5 within 45 days after their companies' fiscal year end. A Form 5 not only has to be filed by anybody considered an insider at fiscal-year end, but also by anyone who was considered an insider for any part of the previous year. This is another way the SEC attempts to stop people from poping back-and-forth between being an insider or not just to skirt filing requirements.
Form 4:
Of these three Forms, the Form 4 is the most important source of useful insider data. While Forms 3 and 5 record a snapshot of an insider's holdings of his company's shares, the Form 4 is the dynamic information that gives the best window into the feelings insiders have about their firms' shares. Individuals would do best to spend whatever time and resources they have prospecting through the more useful Form 4 data, and skip over the other two.
A Form 4 lists the name of the insider, their relationship to the company, how many shares were traded, and at what price. It also gives the date of the trade, total holdings of the insider after the transaction, and if the trade was open market, related to the exercise of stock options, or for some other special reason.
Besides being quite detailed, a Form 4 is also timely. With the deadline for filing being the 10th of the month following the transaction, an insider's trade should take 41 days tops to reach the SEC, and that's only if the insider trades during a 31-day month. Form 4s can, of course, be filed immediately, and some are. However, there is always a predictable bulge in the number of filings around the 10th of the month as insiders rush to meet the deadline.
Insiders don't wait until the last minute to be sneaky. The deadline surge is more the result of procrastination. The fact is that filling out a Form 4 is just annoying paperwork for insiders, most of whom are busy executives. Typically, the Form is passed to an equally overloaded secretary or company lawyer to complete, and it is not likely their first priority either.
This may explain why some (perhaps 5%)of the From 4s filed the SEC are filled out incorrectly. These mistakes seem to be made as much by highly paid legal counsel as overworked secretaries, and explain why even the most expensive insider database isn't perfect. Another subset of filings also reaches the SEC late. In any given week, Form 4s with trade dates that are months or even a year old betray the largess of insiders or their charges. Again, this is more likely the result of a mistake than intended deceit. Late filers generally don't get more than a slap on the wrist from the SEC if no harm seems to be done. But worse can, and does, happen to late filers.
Fortunately, the vast majority of insiders are both diligent and accurate when filing their Form 4s, and they supply the market with high-quality investment information every time they trade their own company's shares.
Form 144:
Form 144 data is considered by many to be the second most useful stream of insider information the SEC has to offer. This Form is filed by people holding unregistered securities as the final part of a process that exempts the shares from being registered with the SEC before being sold in the open market. Form 144s are therefore a harbinger of the insider selling activity that may be filed with the SEC in the near future.
According to the Securities Exchange Act of 1933, securities must be registered with the SEC before being issued to the public. But the SEC isn't so anal in its mandate to protect individual investors not to realize that the gruesome burden of disclosure doesn't make sense all the time. There are numerous exemptions from registration that give companies the ability to issue small amounts of shares directly to somebody as part of a stock bonus, pension, or profit-sharing plan, or a private placement, among other reasons. Under Rule 144 of the Code of Federal Regulations, the people who receive these restricted securities also don't need to register them when they finally sell the shares in the open market. Rule 144 does hold up a few hoops for sellers of unregistered shares to jump through before they can unload, but the requirements generally make sure that the amount of shares is reasonably small, and that the seller isn't an underwriter.
Criteria met, a person may file a Form 144 with the SEC giving notice of their intent to sell a specified number of unregistered shares within the next three months. The Form 144 does not commit the filer to sell the shares indicated on the Form within three months, but if they aren't, the Form 144 must be amended.
Typically, the shares indicated on a Form 144 have probably already been sold by the time you see the document. If the seller is an insider, they may actually file the Form 144 and Form 4 sale at the same time. This makes sense. After all, why would the holder go through the paperwork of a Form 144 unless they were ready to pull the trigger? In any case, Form 144s still indicate that somebody has, or is expected to, sell shares. That's useful information to at least keep in the back of you mind when researching a new investment idea, or following a stock you own.
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