Define backdating options


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The Sarbanes-Oxley Act, passed in 2002, requires that options be reported to the SEC within two days of the grant, and makes backdating harder to do.

In order to recover damages in a lawsuit against your company for backdating, you will have to prove fraudulent intent, which can be very hard to do.

This practice of changing the so-called date that the option was granted to the employee is called "backdating," and is illegal.

Companies generally use stock options as an incentive to the employees.

After 123R, the “fair value” of discounted options will be greater than the “fair value” of comparable undiscounted options, resulting in higher compensation expenses.