Analog Devices fined for stock-options backdating - from Pravda.ru

Analog Devices (NYSE: ADI), an American multinational producer of
semiconductor devices, will have to pay a $4 million fine for illegal
stock-options backdating.

The company decided to settle the case without
admitting or denying the claims and agreed to cease and desist from
such practices in the future.

Securities and Exchange Commission raised claims of
backdating options (the practice was registered in 1998, 1999 and 2001)
asking the company for compensation of $3 million and exclusively its
CEO, Jerald Fishman, for a $1 million fine.

In addition, Mr. Fishman will return $450,000 of
gains from exercising a 1998 backdated option grant, along with $42,110
in interest, and Analog will reprice two option grants that Mr. Fishman
hadn't yet exercised in order to eliminate any benefit from the
backdating.

SEC regulators blamed Analog for picking days prior
to the grant date when the stock price was lower, potentially
increasing the option's value. Thus the company failed to properly
expense the cost of nearly $31 million of compensation costs and misled
investors.

SEC didn’t fine Analog for granting executive and employee stock options in advance of announcing positive financial results.

Options are financial instruments that convey the
right, but not the obligation, to engage in a future transaction on
some underlying security, or in a futures contract. In other words, the
holder does not have to exercise this right, unlike a forward or
future. For example, buying a call option provides the right to buy a
specified quantity of a security at a set strike price at some time on
or before expiration, while buying a put option provides the right to
sell. Upon the option holder's choice to exercise the option, the party
who sold, or wrote, the option must fulfill the terms of the contract.