It’s often assumed that when directors buy or sell their company shares, they must know something that we don’t. But how true is that? And is the timing of their deals significant?
The rule is simple: if you know privileged information about a company, you can only deal in its shares when that information becomes public.
Directors will typically receive a monthly or quarterly confidential dashboard showing how well the company’s doing against its chosen key performance indicators. They’ll also be aware of anything out of the ordinary being planned – they’ll have inside information on proposed acquisitions or sales and of any likely fundraisings, especially if shareholder approval would be required. Timewise, that leaves them with only comparatively small windows during which they’re allowed to buy or sell, which in most cases occur immediately after the announcement of the latest financial accounts.