Question

Pauline, the president of Business Corp, falsified documents to make it appear as if she had been granted stock options on certain dates, and she selected the dates after the fact, picking dates on which the stock price was low. Which of the following offenses, if any, did she commit
a. Stock option backdating
b. Insider trading
c. False entry
d. False imprisonment.

Answer 1

Answer: The offense Pauline commited is known as Stock Option Backdating.

Stock option backdating refers to the act of changing the date a stock option was offered usually to an earlier date when the stock option was cheaper.

This is done to make the stock purchase price lower at the time of purchase so that the individual can sell at a higher price when the stock rises.

Stock option backdating are legal when clearly communicated to the company shareholders, properly reflected in earnings, and properly reflected in tax calculations.