Insider trading vs tracking public disclosures: what's illegal, what's public, and what following a filing actually is

I'm Chris, co-founder of Autopilot. "Isn't that insider trading?" is the question I've been asked most at dinner tables since we started. It's a fair question with a clean answer, and the answer turns on one word: public. Here's what insider trading legally is, what the public disclosures that our Portfolios follow are, why acting on a public filing is the opposite of insider trading, and the difference between the kinds of disclosed trades people track.

One thing first, because we're an SEC-registered investment adviser and I have to say it. Autopilot is the app. The actual investment advice comes from Autopilot Advisers, LLC. If you want the full legal version of anything in here, it's on our disclaimer page.

1) What insider trading is

The SEC's definition, in plain terms: illegal insider trading is buying or selling a security, in breach of a fiduciary duty or another relationship of trust and confidence, on the basis of material, nonpublic information about that security. It also covers tipping that information to someone else, trading by the person tipped, and trading by people who misappropriate the information. The SEC's own examples include corporate officers, directors, and employees trading on confidential developments; their friends and family who trade on tips; employees of law, banking, brokerage, and printing firms using what they learned on the job; government employees trading on confidential information from their work; and political-intelligence consultants who tip or trade on it. The common thread is information the market doesn't have, used by someone who wasn't supposed to use it.

2) What a public disclosure is

The disclosures our Portfolios follow are the opposite: documents that exist because the law requires certain people to tell the public what they did. Three kinds come up. Form 13F: a quarterly report by institutional managers over the reporting threshold, listing US-listed holdings as of quarter end, filed up to 45 days later; it's what our hedge fund trackers follow, and I read one line by line in How to read a 13F filing, line by line: what's in it, what's missing, and how it differs from 13D and 13G. Form 4: the report a company's directors, officers, and holders of more than ten percent of a share class must file when they buy or sell that company's stock, due before the end of the second business day after the trade, with an initial Form 3 when they first become an insider. And the periodic transaction reports members of Congress file under the STOCK Act within 45 days of a trade, covered in How to track Congress stock trades: the STOCK Act reports, where to read them, and how following them works.

3) Why following a filing is the opposite of insider trading

By the time you can read a filing, everyone can. The information is public by definition, so trading on it can't be trading on nonpublic information, and you owe no duty to anyone that reading a public document breaches. That's why 13F-based investing has been an industry for decades, why insider-buying screens are a standard tool, and why nobody has ever needed permission to read EDGAR. Two honest consequences come with that. First, the price has usually already moved: a filing tells you what someone did weeks or months ago, and the market saw it the same day you did. Second, legal insiders are allowed to trade their own company's stock; the Form 4 is the record of legal trades, and the illegal kind by definition doesn't get filed as such. So "insider trades" in a tracker means legal, disclosed trades by insiders, which is a very different thing from insider trading.

4) Insider trades versus congressional trades

Both are disclosed after the fact, and that's where the resemblance ends. A Form 4 comes from a person inside one company, about that company's stock, within two business days, and it reflects what the insider knows about their own business, along with all the ordinary reasons executives buy and sell, like compensation and diversification. A congressional report comes from a lawmaker, about any stock, within 45 days, and it reflects whatever a person in that position chose to do with their own money. One is narrow, fast, and about a single business; the other is broad, slower, and about a person's judgment across the market. Neither tells you why. Our politician trackers follow the congressional reports, and our hedge fund trackers follow 13Fs; we don't publish a Form 4 tracker, though Form 4 is public and free on EDGAR for anyone who wants to read it.

5) What following a filing on Autopilot actually is

Our tracker Portfolios follow public filings and nothing else. When a filing arrives, the Portfolio updates; you give Autopilot Advisers limited authority to send orders to that account; when the Portfolio changes, we send them and your broker fills them; the money stays put. Everything in that chain is public and after the fact, which is both why it's legal and why it lags. The lag is the honest cost of the legality, and every tracker's fact sheet says so. How the trackers work, and what the filings can't tell you, is in Every hedge fund and Wall Street Portfolio you can follow on Autopilot, and how each one works and What are 13F filings, and how do you use them to see what hedge funds are buying?.

Frequently asked questions

What is insider trading and how is it different from tracking public disclosures?

Illegal insider trading, per the SEC, is buying or selling a security in breach of a duty of trust on the basis of material, nonpublic information, including tipping and trading on tips. Tracking public disclosures means acting on documents the law requires people to file publicly, such as 13Fs, Form 4s, and congressional transaction reports. Because the information is public when you read it, acting on it isn't insider trading; the trade-off is that the market saw it when you did and the price has usually already moved.

What's the difference between watching insider trades and watching congressional trades?

An insider trade is a company director, officer, or large holder buying or selling their own company's stock, disclosed on Form 4 within two business days: narrow, fast, and about one business, with ordinary motives like compensation mixed in. A congressional trade is a lawmaker's transaction in any stock, disclosed under the STOCK Act within 45 days: broad, slower, and about a person's judgment across the market. Both are legal, disclosed after the fact, and silent about why.

Is it legal to copy a hedge fund's 13F filings?

Yes. A 13F is a public document filed with the SEC, listing a manager's US-listed holdings as of quarter end, available to anyone on EDGAR. Investing based on public filings uses no nonpublic information and breaches no duty, which is why 13F-based strategies have existed for decades. The cost of that legality is the lag: the filing arrives up to 45 days after the quarter ends, and the fund may have changed positions since. Autopilot's hedge fund trackers follow these filings.

What is a Form 4 filing?

The SEC form a company's directors, officers, and holders of more than ten percent of a class of its stock must file when their ownership changes, including buying or selling shares and option grants or exercises, due before the end of the second business day after the transaction. An initial Form 3 is filed when someone first becomes an insider. Form 4s are public on EDGAR and record legal insider trades, which is different from illegal insider trading.

TLDR

Insider trading is using information the market doesn't have, in breach of a duty. A filing is information the market does have, by law. Following a 13F, a Form 4, or a congressional report is acting on public documents after the fact, which is legal and lagged, and the lag is the price of the legality. Insider trades in a tracker means legal, disclosed trades; the illegal kind never files.

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The description of insider trading follows the SEC's investor.gov as read on the publish date and is general education, not legal advice; Form 4 and Form 13F facts follow public sources and the SEC's own materials. Autopilot's tracker Portfolios follow public filings, which lag the filer's actual positions. Nothing here is a recommendation or a claim about results.