Backdating securities

Law360 (June 15, 2006, AM EDT) -- It is virtually impossible to pick up a newspaper these days and not see an article about the ever-growing list of companies being caught up in investigations concerning allegations of backdated stock options.

From my perspective, the collective efforts by the SEC are a model way of addressing an issue — proceeding from various perspectives to come up with practical and wide-ranging solutions. I'd like to address this on two fronts — first, I'll discuss how we got to our efforts at the Commission and then I'd like to step even further back and talk about some of my impressions on how we ended up with the option issues we are confronting.

First, there are the recently adopted rules relating to executive compensation disclosure which specifically address options.

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.

Despite all the recent media attention, Brocade and Comverse are not the SEC's first stock options cases.

In the past few years, we brought two other cases involving option issues in the context of allegations relating to broader financial frauds — one in 2003 involving Peregrine and one in 2004 involving Symbol Technologies.

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