Is backdating stock options illegal partnership dating and single services

The stock plans of many public companies prohibit the granting of below-market options; other companies disclose in their SEC reports that stock options are granted at market and prepare their financial statements on that basis.

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In its most basic form, backdating can range from the blatant falsification of a document to take advantage of a lower stock price to allowing executives to select a grant date during a specified period, for example during the 30 days after the grant is approved by the board or committee.

Although these practices involve different types of conduct, both create problems because the date when the exercise price is set is not the same as the date on which the option is awarded.

This problem occurs most often when boards or committees act by unanimous written consent but there is a delay in the receipt of all of the signed consents.

Even though no documents are backdated and there may be no intent to select a lower exercise price, backdating issues may arise if the stock price increases before the corporate formalities have been completed.

Civil and criminal authorities are investigating the option granting practices of many companies.

Companies and individuals could face monetary penalties, restitution and disgorgement under the securities laws and the Internal Revenue Code.An option granted at less than fair market value will not qualify as an incentive stock option and therefore generally will be subject to income tax and withholding requirements upon exercise of the option.An option granted at less than fair market value will also not qualify as “performance based compensation” and thus must count toward the

Companies and individuals could face monetary penalties, restitution and disgorgement under the securities laws and the Internal Revenue Code.An option granted at less than fair market value will not qualify as an incentive stock option and therefore generally will be subject to income tax and withholding requirements upon exercise of the option.An option granted at less than fair market value will also not qualify as “performance based compensation” and thus must count toward the $1 million executive compensation deduction cap under Section 162(m) of the Internal Revenue Code.Finally, an option granted at less than fair market value that either vests in whole or in part after December 31, 2004 or granted or modified after October 3, 2004 raises issues under the new deferred compensation rules set forth in Section 409A of the Code.Under Section 409A, the recipient could be subject to acceleration of taxable income and additional taxes and penalties, and the company could be subject to special tax withholding and reporting requirements.SEC Chairman Christopher Cox recently stated that the proposed SEC rules on disclosure of executive compensation will “almost certainly address options backdating explicitly.” I. Companies have considerable discretion in determining the timing of stock option awards.

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Companies and individuals could face monetary penalties, restitution and disgorgement under the securities laws and the Internal Revenue Code.

An option granted at less than fair market value will not qualify as an incentive stock option and therefore generally will be subject to income tax and withholding requirements upon exercise of the option.

An option granted at less than fair market value will also not qualify as “performance based compensation” and thus must count toward the $1 million executive compensation deduction cap under Section 162(m) of the Internal Revenue Code.

Finally, an option granted at less than fair market value that either vests in whole or in part after December 31, 2004 or granted or modified after October 3, 2004 raises issues under the new deferred compensation rules set forth in Section 409A of the Code.

Under Section 409A, the recipient could be subject to acceleration of taxable income and additional taxes and penalties, and the company could be subject to special tax withholding and reporting requirements.

SEC Chairman Christopher Cox recently stated that the proposed SEC rules on disclosure of executive compensation will “almost certainly address options backdating explicitly.” I. Companies have considerable discretion in determining the timing of stock option awards.

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Companies and individuals could face monetary penalties, restitution and disgorgement under the securities laws and the Internal Revenue Code.

An option granted at less than fair market value will not qualify as an incentive stock option and therefore generally will be subject to income tax and withholding requirements upon exercise of the option.

An option granted at less than fair market value will also not qualify as “performance based compensation” and thus must count toward the $1 million executive compensation deduction cap under Section 162(m) of the Internal Revenue Code.

Finally, an option granted at less than fair market value that either vests in whole or in part after December 31, 2004 or granted or modified after October 3, 2004 raises issues under the new deferred compensation rules set forth in Section 409A of the Code.

million executive compensation deduction cap under Section 162(m) of the Internal Revenue Code.Finally, an option granted at less than fair market value that either vests in whole or in part after December 31, 2004 or granted or modified after October 3, 2004 raises issues under the new deferred compensation rules set forth in Section 409A of the Code.Under Section 409A, the recipient could be subject to acceleration of taxable income and additional taxes and penalties, and the company could be subject to special tax withholding and reporting requirements.SEC Chairman Christopher Cox recently stated that the proposed SEC rules on disclosure of executive compensation will “almost certainly address options backdating explicitly.” I. Companies have considerable discretion in determining the timing of stock option awards.

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