The Quiet Channels of Insider Trading
Trades insiders route through family, trust, and foundation accounts are more profitable, and more informative, than trades in their own name.
When corporate insiders trade, they must also disclose indirect trades made through accounts they control, including family, trust, retirement, and foundation accounts. Those filings usually draw less attention than trades in the insider's own account. This research suggests that is a mistake.
Indirect trades turn out to be more profitable than insiders' direct trades. They are disproportionately made by opportunistic insiders, the ones whose trades are nonroutine, profitable ahead of earnings announcements, or short-horizon, and they carry more predictive information about upcoming earnings surprises and large price moves.
The pattern concentrates where private information is most valuable, at firms with high information asymmetry. It also responds to oversight: insiders make fewer indirect trades after periods of intense regulatory scrutiny.
For regulators and investors reading insider filings, the message is to watch the accounts in the background, not just the insider's own.
The Takeaway
The most informative insider trades are often not in the insider's own account. Indirect trades through controlled accounts outperform direct ones and predict what comes next.