New amendments for Rule 10b5-1 trading plans by the U.S. Securities and Exchange Commission (SEC) will be used to make insider trading minimal. Included in the new rules are an “affirmative defense” that will allow companies continue to buy and sell stock, as long as everything is done in good faith. The new rules also do not permit overlapping trading plans, and issuers must report every year whether they have adopted new insider trading policies.

Nelson Mullins Riley & Scarborough LLP partners Gary Brown and Charles Vaughn spoke to Law360 about what the new amendments mean.

Brown, a securities compliance and corporate governance attorney said, "If, for example, you — without material nonpublic information — instructed your broker to sell securities two weeks from now, would that be a non-10b5-1 trading arrangement? I think so.” Brown also advises companies to be conservative about their reporting and to check if their executives are doing anything additional, like limit orders.

Vaughn, who is co-chair of the firm's securities practice, said that a lot of the new amendments are good, such as a cooling-off period and the new boxes for executives on their Form 4s. According to Vaughn, "Many of our clients are smaller reporting companies, and the cumulative effect of these rules over the past 18 months — particularly if the climate change regulations are adopted — is enormous.”

Both Brown and Vaughn agree that the new mandatory quarterly reports on trading plans for officers and directors will be the biggest change for firms, and that with this new approach, the SEC is pushing a prescriptive approach to company disclosures.

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