Take note of deals involving insiders

Q:What actually qualifies as an insider? Who does this term cover, and why is this group so important to follow? -- S.R., via the Internet

Answer: An insider is a corporate officer, director or other employee in a policymaking function who has potential access to nonpublic information about a firm.

The Securities and Exchange Commission requires that any stock transactions involving such insiders be disclosed publicly. This can involve purchase or sale of stock, exercising of options or granting of options. Insider transactions are disclosed in filings that can be viewed on the SEC's Web site, http://www.sec.gov.

"Investors should pay attention to this because corporate executives and board members can say a lot of things publicly, but seeing what they do with their own money speaks louder," said Ben Silverman, director of research for InsiderScore.com in Princeton, N.J., which tracks insider trading for institutional clients.

Of course, sometimes stock sales are done for perfectly legitimate reasons, such as pay ing for a house or a child's education.

Separate from legal insider trading by corporate insiders who must disclose activity, there is illegal insider trading on information that isn't public. The latter can include individuals with no company connection but who somehow receive material nonpublic information.

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A recent response to a column question incorrectly stated that the Travelers Cos. Inc. had returned federal bailout money. The Travelers Cos. Inc. has not requested nor received government bailout money.

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