These Stock Options Deserve the SEC’s Scrutiny

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Such “spring-loaded” options have long been a legal gray area. In 2002 the late 2000s, officials cracked down on the more egregious practice of backdating, in which companies effectively guaranteed executives’ gains by granting options at a lower, historical exercise price. Criminal prosecutions, together with a new pre-existing statutory requirement that options grants be disclosed within two days, made it abundantly clear that backdating was illegal. But since no similar action was taken on spring-loading, companies got the message that it might be OK.