Backdating the

27-Nov-2016 14:24

Options backdating is the practice of altering the date a stock option was granted, to a usually earlier (but sometimes later) date at which the underlying stock price was lower.

This is a way of repricing options to make them valuable or more valuable when the option "strike price" (the fixed price at which the owner of the option can purchase stock) is fixed to the stock price at the date the option was granted.

My views are my own and do not necessarily reflect the views of the Commission or any other member of the staff. In addition to our investigations, there is substantial criminal interest in options matters from United States Attorneys' Offices nationwide.

In recent months, the SEC has brought two enforcement actions — one relating to Brocade and another involving Comverse.

The SEC’s opinions regarding backdating and fraud were primarily due to the various tax rules that apply when issuing “in the money” stock options vs.

the much different – and more financially beneficial – tax rules that apply when issuing “at the money” or "out of the money" stock options.

The allegations of illicit sex, drugs, and rock and roll reminded me of the 60s ... Sure, Broadcom had to take a .2 billion charge to fix the accounting mess left by the company's former executives.I am sure that from time to time we have all come across the vexed question of backdating documents.A client or, in the case of an in house lawyer colleague (who for the purposes of this article will also be considered a client), asks you to prepare a document and then your heart sinks as he says “oh and it has to be dated” and gives a date which has already passed.Additionally, companies can use backdating to produce greater executive incomes without having to report higher expenses to their shareholders, which can lower company earnings and/or cause the company to fall short of earnings predictions and public expectations.Corporations, however, have defended the practice of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.

The allegations of illicit sex, drugs, and rock and roll reminded me of the 60s ... Sure, Broadcom had to take a .2 billion charge to fix the accounting mess left by the company's former executives.

I am sure that from time to time we have all come across the vexed question of backdating documents.

A client or, in the case of an in house lawyer colleague (who for the purposes of this article will also be considered a client), asks you to prepare a document and then your heart sinks as he says “oh and it has to be dated” and gives a date which has already passed.

Additionally, companies can use backdating to produce greater executive incomes without having to report higher expenses to their shareholders, which can lower company earnings and/or cause the company to fall short of earnings predictions and public expectations.

Corporations, however, have defended the practice of stock option backdating with their legal right to issue options that are already in the money as they see fit, as well as the frequent occurrence in which a lengthy approval process is required.

In 1972, a new revision (APB 25) in accounting rules resulted in the ability of any company to avoid having to report executive incomes as an expense to their shareholders if the income resulted from an issuance of “at the money” stock options.