Since insiders are required to report their trades, others often track these traders, and there is a school of investing which follows the lead of insiders.This is of course subject to the risk that an insider is making a buy specifically to increase investor confidence, or making a sell for reasons unrelated to the health of the company (e.g. a desire to diversify or pay a personal expense).
As of December 2005 companies are required to announce times to their employees as to when they can safely trade without being accused of trading on inside information.
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