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SEC Raises Questions About Timing Of Executive Option Grants

Logue Ann C. | December 14, 2004

When chipmaker Analog Devices filed its 10-K report on Nov. 30, it announced that the SEC is conducting an inquiry into how the company has granted executive stock options. “We weren’t under any obligation to make the statement,” says Maria Tagliaferro, the company’s director of corporate communications. The company’s legal counsel believes that there may be other companies included in the same inquiry, but they are not yet known.

“We’ve identified the timing of options grants as a matter of interest to us,” says John Heine at the SEC’s Office of Public Affairs.

If executives are given options immediately before positive news is released, they are potentially benefiting from material non-public information; the options would be granted at the lower, pre-announcement price, thereby allowing a company to record a smaller compensation expense.

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