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A quick examination of the cases against Brocade clearly identifies why backdating is synonymous with fraud, even though no U. The practice involves using hindsight to assign a stock-option contract an earlier date than its actual grant date.
By pushing the date into the past, to a time when the underlying stock traded at a lower price than it did the day the grant was issued, the option holder is, in effect, being given the promise of cash.
And this is why defenses to backdating sometimes get hard for me to understand.
Please name for me one company that has ever, in the history of corporate law, backdated stock options and yet properly disclosed and accounted for them.
In the context of mutual funds, a feature allowing fundholders to use an earlier date on a letter of intent to invest in a mutual fund in exchange for a reduced sales charge, e.g.
Backdating is usually illegal; for example, one may use backdating to evade taxes.
However, it can be permissible under certain circumstances.