WASHINGTON, Feb 10 (Reuters) - U.S. securities regulators said on Saturday they do not expect to bring charges in all of the 130 or so stock option backdating matters they are investigating and have defined factors used to evaluate the cases.
Antonia Chion, associate director of enforcement at the U.S. Securities and Exchange Commission, said the SEC is looking at “how bad is the conduct and how good is the evidence.”
“I don’t believe we’re going to be bringing 130 cases,” Chion said during a panel discussion at the annual SEC Speaks event.
The SEC has been investigating backdating cases over the past year, along with a Justice Department task force in California and the Internal Revenue Service. The SEC recently filed civil charges against former executives at Engineered Support Systems Inc., while the Justice Department filed criminal charges last summer against former executives at Comverse Technology Inc. CMVT.PK and Brocade Communications Systems Inc.BRCD.O
Cox, speaking to reporters Friday, said the commission will have news very soon on more settlements in enforcement cases involving misdating of option grants. He declined to elaborate.
Authorities are trying to determine if companies manipulated the grant dates of stock options to boost the profits available to corporate executives who got them.
Chion said during the panel that the first thing SEC investigators are looking at when evaluating backdating cases is the duration of the misconduct and the number of instances of backdating.
“We’re also looking at the quantitative materiality of the compensation charges and if the company’s restating,” she said.
Companies can run afoul of securities laws if they do not record the profit executives receive from backdating options as a compensation charge.
Also, Chion said the SEC is looking at the quality of the evidence in the form of documents, e-mails and witness testimony, but said the agency will also consider circumstantial evidence in which there is a clear pattern of options being granted at historic low prices.
She said the level of the companies’ cooperation is also a strong consideration and that companies’ internal investigations can speed along the SEC’s work.
“We really do look at what is quality of the investigation and the breadth and the scope of how it’s been handled,” Chion said.
Chion did not discuss the amounts of penalties that can be expected and only fair fund are being created to distribute the disgorgement and penalties to injured shareholders.