Stock option backdating 2016

15 Mar

The company would then grant the option but date it at or near its lowest point.

This is the granted option that would be reported to the SEC.

The practice is illegal if it is not followed by proper disclosure and related expenses are not recorded in financial statements.

Montreal Exchange/Bourse de Montreal The oldest stock exchange in Canada trading stocks, bonds, futures, and options.

In theory, it’s fine to offer an employee a backdated stock option — such as one for when a firm’s stock is currently at — as long as it’s accounted for correctly.

Ninth Circuit Judge Carlos Bea noted in his opinion on the appeals case yesterday that for “in the money” options, in which an option’s strike price is typically lower than a firm’s share price, accounting principles require the company to record an expense for the profit to the options recipient, since the company could have sold its stock at the market price rather than grant an option.

Dozens of companies are under investigation by the Securities and Exchange Commission for backdating stock options. Alternatively, a company could hit a low without actually backdating its options by granting awards just before a major (positive) earnings announcement, a practice known as "spring-loading." A more extreme and more clearly illegal practice was to say that an award was exercised on a date other than its actual exercise date.

The practice of backdating stock options as a way of retaining valued employees is legal, as long as the true expense of the backdated options is recorded as a company expense for employee compensation. District Attorney's Office has also issued several subpoenas in launching a criminal probe. The typical practice was to record a felicitously timed prior date as the grant date, such as the point when the stock had been at its lowest in recent months, instead of the date when the award was actually granted. Nejat Seyhun of the University of Michigan for the newspaper showed that that options granting practices between 20 often failed to comply with the Sarbanes-Oxley requirement that grants of awards to executives be reported within two days of board approval (T"he Dating Game: Do Managers Designate Option Grant Dates to Increase Their Compensation? Prior research at Erik Lie at the University of Iowa found a pattern of probable options backdating in a number of companies prior to 2002.Cases of backdating employee stock options have drawn public and media attention.According to a study by Erik Lie, a finance professor at the University of Iowa, more than 2,000 companies used options backdating in some form to reward their senior executives between 19.