Human Capital & Careers

Forrester under Formal SEC Investigation

Finance and human resources were blamed for backdating errors. Nasdaq gives market research company more time.
Stephen TaubJune 20, 2007

The Securities and Exchange Commission has launched a formal investigation of Forrester Research’s stock option granting practices, which grew out of an informal probe launched in December. The company says it is cooperating with the SEC, according to a regulatory filing.

In addition, Forrester reports that on June 14, The Nasdaq Stock Market granted the company’s request for continued listing on the exchange. The company had previously received letters from the Nasdaq staff that it had failed to comply with listing standards. Specifically, Forrester did not file its annual report for the 2006 calendar year, nor did it file its quarterly report for the period ended March 31, 2007. The continued listing is subject to certain conditions, including that by September 12, Forrester files the late reports and any required restatements.

In February, CFO.com reported that Forrester disclosed that an audit committee investigation determined it had issued stock options with incorrect strike prices between 1997 and 2003. At the time, the company noted that officials were unsure whether the market research firm would have to restate its financial reports to adjust for the improper dating.

The audit committee blamed the backdated options on poor controls and documentation, noting that the finance and human resources departments were equally responsible for the errors. CFO and Treasurer Warren Hadley resigned last December after the firm announced that initial findings of the internal investigation had uncovered irregularities with respect to an option grant for 5,000 shares made to Hadley in 1999. Forrester also said that the executive who led the human resources department also is no longer with the company.

The audit committee also pointed out that Forrester’s chief executive officer, George F. Colony—who took over as acting CFO after Hadley’s departure—and two current directors, were involved in approving stock option grants during the period in question. However, the committee “found no evidence to suggest that any of them were aware of improper practices with respect to stock options.”