Restricted stock backdating
We recommend that you contact your outside legal counsel promptly to discuss the issues outlined here and to formulate a plan of action for your company.Here are the most immediate issues that you should discuss with counsel: Preliminary Review of Stock Option Practices.As discussed below, however, it is advisable for all public companies to consult with outside counsel in order to discuss the issues outlined here and to formulate a plan of action going forward. Thus far, recent government investigations appear to have centered around backdating of grants to executive officers.These inquiries have presumably focused on executives because information relating to executive grants is publicly disclosed in proxy statements, and can easily be compared to stock price history to determine the existence of suspicious patterns.If your company has been publicly identified as one with a risk of backdating problems, you should consider carefully reviewing the grants identified as suspect to determine if there is any merit to the suspicions.Determine the Appropriate Response to Investor Inquiries.
Published reports have highlighted some instances in which a companys stock price increased substantially shortly after the reported grant date, suggesting that backdating may have occurred.
Your investor relations department may be receiving calls from investors asking if you have a backdating problem.
There may be a natural tendency to respond, possibly without having done any investigation, that the company has no problems or is not aware of any problems.
Backdating refers to the intentional setting of a grant date that precedes the actual date of the corporate action that effected the grant, in order to achieve a lower option exercise price and hence a higher value to the recipient.
Backdating results in an option already being in the money at the time of the grant.