Insiders Profit During ‘8-K Trading Gap': Study

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By Michael Greene

Sept. 15 — Public company insiders are trading extensively during the four-business-day window in which significant corporate events are required to be reported in Securities and Exchange Commission filings, and earning a hefty profit, a recent academic study suggests.

The study's authors—Harvard Law School professor Alma Cohen, Columbia Law School professor Robert J. Jackson Jr. and Columbia Law School's Joshua R. Mitts—refer to this period as the Form 8-K “trading gap.”

“This paper raises concerns about insider trading in public companies,” said Jackson, co-director of Columbia Law School's Ira M. Millstein Center for Global Markets and Corporate Ownership, in a related release. “It shows that SEC rules leave open a significant opportunity for insiders to trade on corporate information.”

Meaningful Profits

Under SEC requirements, companies are required to disclose significant corporate events within four business days of their occurrence in a filing known as a Form 8-K.

The authors' study, “The 8-K Trading Gap,” identified and examined more than 15,000 Forms 8-K detailing corporate insider trades between 2004 to 2014. They said their research shows that public-company insiders trade during the 8-K gap—“when market-moving information is known by insiders but not by most investors”—and earn economically and statistically meaningful profits when doing so.

“Our findings suggest that Congress and the SEC should consider whether allowing firms to delay the announcement of material nonpublic information for four days creates trading opportunities that strain the already significant public resources dedicated to enforcing the rules that prohibit improper trading by insiders,” the paper states.

Not Indicative of Improper Acts 

The paper cautioned that its findings do not indicate whether any trading in the sample was illegal or improper.

Among other policy implications, the paper asked:

• whether public companies should consider extending “blackout period” policies to prohibit trading on information that will later be disclosed in a Form 8–K; and

• whether the findings provide a framework for lawmakers considering changes to the SEC's mandatory-disclosure rules.


According to Jackson's release, Rep. Carolyn Maloney (D-N.Y.) will prepare legislation to address the trading gap. “The results of this study are very troubling,” Maloney said in the release. “This kind of activity undermines the integrity of our markets, and both Congress and the SEC should work to stop it.”

To contact the reporter on this story: Michael Greene in Washington at

To contact the editor responsible for this story: Yin Wilczek at

The paper is available at

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