Backdating


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Backdating

In the context of mutual funds, a feature allowing fundholders to use an earlier date on a letter of intent to invest in a mutual fund in exchange for a reduced sales charge, e.g. Giving retroactive value to purchases from the earlier date. In the context of corporate governance, the illegal practice of setting the date of options awarded as part of executive compensation to a period when the stock price was very low (rather than setting the date of the options on the date the award was made).

Backdating

The act of dating a document before the date it was actually signed. For example, if one signs a contract on February 1, one may backdate it to January 31. Backdating is usually illegal; for example, one may use backdating to evade taxes. However, it can be permissible under certain circumstances. For instance, one may backdate an insurance claim if there was an unavoidable delay between the date the insured event occurred and the day the claim was made.

backdating

The practice of allowing a mutual fund shareholder to use previous purchases of the fund's shares so as to qualify for reduced commission charges on subsequent purchases. Backdating is used when a fund offers declining proportional sales charges on larger purchases.
References in periodicals archive ?
We combine this legal data with data on option grants and statistical simulation to estimate both the probability that a firm engaged in backdating and the extent to which the executive recipients of option grants benefited from that backdating.
We find that a majority of firms that likely engaged in backdating were never publicly linked to the practice.
However, we further show that the negative relation between unvested options and the occurrence of backdating is largely driven by managers with less persistent incentives from unvested options.
The role of this committee in backdating has not been fully examined in the literature.
An Iowa finance professor's study brought to light the fraudulent practice of backdating options.
This took place at the same time Apple was backdating options for Steve Jobs, putting an extra $20 million in his pocket.
The thing I liked about the Journal's treatment of the Alexander case was how the reporter managed to be respectful toward the Namibian legal system while at the same time hinting to readers that not every society has the same attitude toward backdating stock options as this one does.
Consider that in January 2008, current and former top officers of UnitedHealth Group agreed to pay a record $887 million to settle stock-option backdating charges brought by government agencies and by shareholders bringing private actions.
The article concludes by presenting the potential financial implications of backdating for investors.
As the current wave of stock option backdating investigations and shareholder derivative lawsuits sweeps through the D&O industry, this is a good time to step back, consider what is at stake in these cases, and anticipate some of the D&O coverage issues that will implicated by settlements of these cases.
It provides an estimate of the value loss incurred by shareholders of firms implicated in backdating and compares it to the potential gain that executives might have obtained through backdating.