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My views are my own and do not necessarily reflect the views of the Commission or any other member of the staff. In addition to our investigations, there is substantial criminal interest in options matters from United States Attorneys' Offices nationwide.In recent months, the SEC has brought two enforcement actions — one relating to Brocade and another involving Comverse.Corporations faced pressures in two different directions — they wanted to attract and retain employees with attractive stock ownership opportunities offered by in the money grants, but they also wanted all the corporate advantages of making at the money option grants. The right thing to do was to pick one or the other.A company could legitimately choose to make highly attractive in the money grants, so long it convinced its shareholders that such grants were necessary and desirable and also complied with all of the proper accounting and tax rules.At that time, in the eighties and nineties, stock options, often in the money, were granted to employees in the hope that a highly-motivated employee pool would put the company in a better position to resist in hostile takeover battles.Over time, shareholders objected to the fact that the options were granted in the money and eventually many companies developed stock option plans in which grants could only be made at the money — that is, at the closing price of the stock on the day of the grant.At the same time, there was sharp rise in the overall level of executive compensation (some would say astronomical), despite the million-dollar salary deductibility cap.In this environment, cash-strapped companies found stock options an attractive way to provide competitive compensation without further tapping their limited cash flows.

So, from the shareholder, accounting and tax perspectives, at the money options had certain distinct advantages.Our Office of Economic Analysis then analyzed data and refined the areas of concern.And in the Enforcement Division, we gathered information and data regarding specific cases to bring the issues into focus, culminating in our enforcement actions over the last several years. I am old enough to remember employee stock options as an anti-takeover device.In addition to the enforcement efforts, others at the Commission have taken two other major steps to address this issue.First, there are the recently adopted rules relating to executive compensation disclosure which specifically address options.

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