07:38 Authorities Probe Improper Backdating of Options - WSJ
The WSJ reports federal regulators and academics, scrutinizing a broad pattern of well-timed stock-option grants, are exploring the extent to which companies improperly backdated grants to provide insiders an extra pay windfall. Mercury Interactive (MERQE) admitted to such a practice last week, in an outgrowth of a broader probe of option-granting by the SEC which has made backdating a focus. Helping drive the probe is longstanding academic research that shows an overall pattern of stock prices dropping ahead of the reported dates of option grants and rising just afterward. By tying strike prices to earlier, more favorable dates, executives granted options can instantly lock in a paper gain -- and, if a stock goes up, increase their real gain when they exercise them. Though backdating options isn't necessarily illegal, trouble can arise over such issues as disclosure, said Alan Dye, a securities attorney at Hogan & Hartson LLP in Washington. Besides Mercury, companies that have disclosed they are under investigation by the SEC include Brocade Communications (BRCDE), Siebel Systems (SEBL), Nyfix and Analog Devices (ADI). No charges have been filed against any companies related to the probe. |
