Under the Exchange Act, which of the following is generally considered an insider?

• A. Every person who directly or indirectly beneficially owns more than 10% of any class of equity security
• B. Only officers
• C. Any employee with less than 1% ownership
• D. Any vendor with supply contract

Answer: (A)

Under the Exchange Act, insider status mainly hinges on substantial ownership or control over the issuer. The standard test is beneficial ownership: anyone who directly or indirectly owns more than 10% of any class of the issuer’s equity securities is generally considered an insider. That level of ownership signals significant influence and brings with it disclosure duties and responsibilities regarding trading the company’s securities.

That’s why the option describing someone with more than 10% ownership is the best choice. Officers and other insiders are included in insider status, but the criterion is broader, encompassing any person with sizable ownership, not just officers. An employee with less than 1% ownership and a vendor with a supply contract do not meet the insider threshold on ownership alone.