Stock option backdating 2016
This is the granted option that would be reported to the SEC.
The act of options backdating has become much more difficult as companies are now required to report the granting of options to the SEC within two business days.
This adjustment to the filing window came in with the Sarbanes-Oxley legislation.
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.
the much different – and more financially beneficial – tax rules that apply when issuing “at the money” or "out of the money" stock options.
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.
Occurs when a stock option exercise date is set prior to the date on which the option was granted and at a lower exercise price than the current market price of the company's stock.
The company would then grant the option but date it at or near its lowest point.
The process of granting an option that is dated prior to the date that the company granted that option.
In this way, the exercise price of the granted option can be set at a lower price than that of the company's stock at the granting date.
Rather obviously, this fact pattern results in a violation of the SEC's disclosure rules, a violation of accounting rules, and also a violation of the tax laws.
The SEC has been after the problem of abusive options backdating for several years.