This week I would like to educate our readers about Section 16 of the Securities Exchange Act of 1934. I imagine some of you wondering why that would be important, however, I recommend you read more.

Form 4 is a United States SEC filing that relates to insider trading. Every director, officer or owner of more than ten percent of a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934 must file with the United States Securities and Exchange Commission a statement of ownership regarding such security. The initial filing is on Form 3 and changes are reported on Form 4. The Annual Statement of beneficial ownership of securities is on Form 5. The forms contain information on the reporting person’s relationship to the company and on purchases and sales of such equity securities.

Form 4 is stored in SEC’s EDGAR database. EDGAR is Electronic Data Gathering, Analysis and Retrieval System. It is a registered trademark of the SEC.

A Form 4 must be filed before the end of the second business day following a change in ownership of securities or derivative securities (including the exercise or grant of stock options) for individuals subject to Section 16 of the Securities Exchange Act of 1934.

Insider buys and sells can be a very important indicator of management’s opinion of the valuation of their company’s stock. The logic being that they are the most knowledgeable about the operations of the company. It was very comforting to see significant insider buying at the end of 2008, because it indicated to us that management was confident about being able to navigate a difficult economic environment. I was commenting to Kenn that it seemed as if we were seeing a slew of insider trades this past two weeks and when I looked into the particulars I realized that not only were there a significant number of insider trades, that a preponderance of them were sells. In fact, over the last week there was over $1 billion in insider sells. It appears that although corporations are performing well that the general consensus among management is that this is already reflected in the current valuation. This bears some watching in the coming weeks.