Saw this on the Yahoo unit. Thanks to soib45
Does everyone read that board? Is it a waste of our time to repost here?
John
SEC official: "Hands tied" on spring-loaded options
Tue Oct 3, 2006 6:03 PM ET
By Emily Chasan
NEW YORK (Reuters) - A top U.S. regulator said on Tuesday the
government has little basis for bringing accounting-based enforcement
actions over "spring-loading" of stock options, one of a handful of
options-related abuses currently under investigation.
The accounting rules for spring-loaded options are clear and many
companies may have accounted for them properly, Scott Taub, deputy
chief accountant of the U.S. Securities and Exchange Commission, said
at a Financial Accounting Standards Board user advisory council
meeting in New York.
Asked whether he thought it would be possible for the SEC to bring any
enforcement actions due to accounting for spring-loading, Taub told
Reuters: "I doubt that you could get one on accounting, from what I've
seen."
The SEC has more than 100 investigations under way to determine if
companies manipulated the prices of stock options given to top
executives to boost the options' potential value.
The main focus of the investigations is on options "backdating," where
grant dates of options are moved back from the actual date of issue to
lower the options' exercise price.
"Spring-loading" is a slightly different approach with the same
objective. It occurs when an option grant date is set to just precede
a positive news announcement likely to boost the market share price of
options' underlying shares.
A similar practice known as "bullet dodging" involves setting the
grant date just after a negative news announcement expected to be
followed by a quick market price rebound.
Like backdating, both spring-loading and bullet-dodging lock in a
profit for the recipient of stock options.
The SEC chief accountant's office in September issued guidance on how
to account for stock options.
That guidance was criticized at the FASB meeting by Damon Silvers,
associate general counsel of the American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO).
Silvers said the SEC guidance on spring-loading would allow companies
to hide important information. "I think you will be judged harshly for
this," he said.
On the guidance as related to spring-loading, the SEC's Taub said:
"The accounting for those kind of options is clear. We felt our hands
were tied."
He said the SEC was not trying to endorse the practice.
"There are people in our building who have varying feelings about
whether spring-loading is good or bad. Accounting-wise we felt stuck,"
Taub added.
"This is accounting literature written in the '70s that clearly did
not hold up well," Taub said. "We don't get to enforce the accounting
standards we wish existed, we have to enforce the accounting standards
that do exist." |
