Options backdating possible in Canada

Stricter disclosure period lessens the likelihood, but income tax rules raise the incentive
By Uyen Vu
|Canadian HR Reporter|Last Updated: 11/22/2006

Stricter disclosure rules in Canada in recent years may have made it more difficult for companies to backdate stock options granted to executives. But that doesn’t mean the practice doesn’t happen on this side of the border, some experts say.

“Is there some evidence that it’s happening? No, there are no specific cases yet. But it’s like asking how common is fraud? You don’t know until you find out,” said Neil Brisley, assistant professor in finance at the Richard Ivey School of Business who’s doing research on stock options-related issues.

In the United States, the Securities and Exchange Commission (SEC) announced this summer that more than 80 companies are under investigation. The SEC has also laid charges against former executives at two companies, Comverse Technology and Brocade Communications Systems.