Google Reaches Settlement With SEC Over Stock Option Charges

by Glen Shapiro, LawAndTax-News.com, New York

17 January 2005

It emerged on Thursday that internet search portal, Google has settled with the US Securities and Exchange Commission over charges which arose prior to its initial public offering (IPO) last year.

The charges related to stock options that the firm awarded to its employees in 2003 and 2004, prior to going public, which were in breach of SEC rules because the stock was not registered with the securities regulator, as it should have been if the issue exceeded $5 million.

According to the SEC, Google failed to make this disclosure because it didn't want its financial information to be leaked to rival firms, and believed that it could rely on complex exemption rules to keep the issue private.

However, director of the SEC's enforcement division, Stephen Cutler last week condemned the firm and its general counsel, David Drummond, explaining that:

"The securities laws exist to ensure full disclosure to investors, including employees accepting stock options as compensation. Companies cannot freely decide that they don't need to comply with the law."

Google settled the charges by signing a cease-and-desist order without admitting or denying wrongdoing, according to reports. However, no fines were imposed on the firm due to its full cooperation with the SEC investigation.

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