UPDATE 1-SEC charges Integrated Silicon with options fraud

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WASHINGTON, Aug 1 (Reuters) - The U.S. Securities and Exchange Commission said on Wednesday it charged Integrated Silicon Solution Inc. (ISSI.O) and its former chief financial officer with stock options backdating fraud.

The SEC alleges that the memory chip designer and Gary Fischer concealed millions of dollars of stock option compensation expenses by providing executives and employees with potentially lucrative options while backdating the grants to avoid reporting the expenses.

Fischer and ISSI have settled without admitting or denying the charges. Fischer has agreed to pay a total of $539,830 to settle the case and has been barred for five years from acting as an officer or director of a public company.

ISSI, which did not pay any fines, settled the matter by agreeing not to violate certain securities laws.

"Fischer was a gatekeeper who had an obligation to accurately account for and disclose the company's stock option expenses," said Marc Fagel, associate director with the SEC's San Francisco office.

"Instead he caused ISSI to make over 60 backdated grants covering almost 14 million stock options over an eight year period."

The SEC alleges that Fischer personally benefited from the backdating scheme.

According to the complaint, Fischer routinely used "hindsight" to select option grant dates when ISSI's stock traded at or near monthly or quarterly lows, and at prices below the closing price on the date when Fischer actually selected the grant date.

The SEC alleges that the backdated grants resulted in materially misleading disclosures. The company has since restated its results, the SEC said.

Fischer's lawyer said his client was pleased to put the matter behind him and move on. Calls to ISSI were not immediately returned.

Shares of ISSI were up 3 percent at $6.54 on Nasdaq. (Reporting by Rachelle Younglai)