The paper [1] finds "at least some of these SEC employee trading profits are information based, as they tend to divest (i) in the run-up to SEC enforcement actions; and (ii) in the interim period between a corporate insider’s paper-based filing of the sale of restricted stock with the SEC and the appearance of the electronic record of such sale online on EDGAR."
On (i): SEC employees are required to divest of their holdings in a company before working on an issue relating to it. The findings thus demonstrates an alignment of ethics and private interests.
On (ii): there is potential for abuse. When an insider sells stock, the sale must be reported electronically to the SEC via Forms 3, 4, and 5. When an insider sells restricted stock it is reported via Form 144. Form 144, unlike Forms 3, 4, or 5, may be filed electronically or by paper - over 90% of Form 144s are filed by paper. These paper filings are only available through third-party data providers, e.g. Bloomberg, and even then at a delay from filing.
On (i): SEC employees are required to divest of their holdings in a company before working on an issue relating to it. The findings thus demonstrates an alignment of ethics and private interests.
On (ii): there is potential for abuse. When an insider sells stock, the sale must be reported electronically to the SEC via Forms 3, 4, and 5. When an insider sells restricted stock it is reported via Form 144. Form 144, unlike Forms 3, 4, or 5, may be filed electronically or by paper - over 90% of Form 144s are filed by paper. These paper filings are only available through third-party data providers, e.g. Bloomberg, and even then at a delay from filing.
[1] http://www.darden.virginia.edu/web/uploadedFiles/RajgopalSEC...