Tax consequences of backdating options
For example, at the money options received more favorable accounting treatment they did not need to be expensed.
They also generally received more favorable tax treatment.
These rules, in combination with the prescient provisions of Sarbanes-Oxley requiring timely reporting of stock option grants, will go a very long way toward preventing the kinds of problems we are seeing today from occurring to the same degree in the future.
Second, in September the Office of the Chief Accountant issued guidance for companies trying to cope with the financial reporting ramifications of their various historical options practices from a reporting perspective.
In the money grants offered instant paper gains and the prospect of future wealth that was obviously attractive to employees, some of whom were themselves entrusted to decide precisely when options would be granted.
First, on the SEC front, our investigations are born of a conscious effort to proactively think about where problems might be, to methodically inquire whether there actually are problems, and then to pursue the best ways to address any problems that exist.
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.