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Why are company Directors legally required to disclose when they buy and sell shares in their companies?

Company directors are legally required to disclose when they buy and sell shares in their companies in order to provide transparency and to prevent insider trading. Insider trading refers to the practice of buying or selling a security, such as a stock or bond, based on material, non-public information about the company. Insider trading is illegal because it allows company insiders, who have access to confidential information about the company, to profit at the expense of other investors who do not have this information.

In order to prevent insider trading and promote fair and transparent markets, many countries have laws that require company directors and other insiders to disclose their trades in company securities. This helps to ensure that all investors have access to the same information about the company and can make informed investment decisions.

In the United States, for example, the Securities and Exchange Commission (SEC) requires company directors, officers, and other insiders to report their trades in company securities through a form known as a “Form 4.” This form must be filed within two business days of the trade and is publicly available on the SEC’s website. Similar disclosure requirements exist in other countries as well.

Overall, the requirement for company directors to disclose their trades in company securities helps to promote fair and transparent markets and prevent insider trading. This helps to ensure that all investors have access to the same information about the company and can make informed investment decisions.

“You should review your rules at the beginning of the day and review your trading at the end of the day. If you followed your rules, even if you lost money, pat yourself on the back” – Van K. Tharp

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