Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Monday, July 24, 2006

Options Backdating: Not a Problem in Canada?

The Toronto Star reported over the weekend (here)that options backdating isn't the problem in Canada that it appears to be here in the U.S. Since 1999, Canadian executives have been required to report all stock activity -- including the receipt of options grants -- within 10 days. In the U.S., prior to SOX changes that require reporting within 2 days, executives were required to report after month-end on Form 4s and for options grants, after year-end on Form 5s.

The Star did not address the question of whether spring loading, which is thought to be a problem at some U.S. companies, is an issue in Canada.

In a related article, though, the Star noted that regulators in Canada will likely begin reviewing option grant information to determine whether backdating has occurred. TSX listing rules prohibit issuers from granting options at other than FMV as of the date of grant and also prohibit issuers from granting options at prices that do not take into account material non-public information. Back in October, TSX sent a letter to listed companies reminding them of these rules.

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