Risk & Compliance

More Backdating Cases Go Poof

VeriSign is Sixth Company to get the happy news from the SEC in recent weeks.
Stephen TaubNovember 15, 2007

VeriSign Inc. said in a regulatory filing Thursday that the Securities and Exchange Commission has dropped an investigation into the company’s historical stock option granting practices without bringing charges.

It was the sixth company to make such an announcement since late October. Triquint Semiconductor joined the relieved group on Tuesday, about a week after Zoran Corp. and Electronic Arts and two weeks after NVIDIA Corp. and PMC-Sierra.

According to published reports, Walter Ricciardi, deputy director of the SEC’s Division of Enforcement, recently said the commission has investigated about 130 companies regarding their stock-option granting practices. That number is higher than the widely held count of 105 companies that had previously disclosed they were targets. Altogether, at least 200 companies have either been targets of regulatory probes or undertaken internal investigations regarding possible improper backdating.

The SEC, for its part, contends that it continues to take backdating seriously, but that investigations that find errors due to sloppiness or other unintentional mistakes are more likely to be dropped.

“I think the commission made it clear early on that we weren’t planning on filing hundreds of enforcement actions,” Marc Fagel, assistant regional director of the SEC in San Francisco, told CFO.com recently. “Some of the factors we’ve looked at have been how high up the misconduct goes and how deliberate it appears to be.” He added that the SEC is especially concerned with cases involving forged documents or “egregious facts.”

The SEC has instituted a new policy of notifying every company it has cleared, which it had not been required to do for informal investigations.