In a first-page lead article of July 21, 2020, the Wall Street Journal reported that the SEC had brought fraud charges against a former CEO, human-resources director, and CFO of Brocade Communications Systems Inc. as a result of ongoing investigations into the back-dating of executive stock options.

It was stated that more than 80 companies are now involved in stock option back-dating investigations and that additional cases will be brought in “coming weeks and months.”

SEC Chairman Christopher Cox said that,

“The full weight of the federal government is being put behind this effort to stamp out fraudulent stock-option back-dating. … [back-dating] deceives investors and the market as a whole, about the financial health of companies that cheat in this way. … It is poisonous to an efficient marketplace.”

The SEC Is Not There Yet

Back-dating of options is just a side-show in the massive , on-going buyback-option programs that have defrauded long-term investors for decades and that are the force supporting equities prices today.

	Maybe a Light Will Go On

The SEC has not yet begun to investigate fraudulent statements by corporate executives that stock buybacks are beneficial for long-term investors or the link between stock-buybacks and insider trading.

Nevertheless, the more that the SEC investigates executive options, the more likely it is that — sooner or later — a light will go on somewhere and the SEC may begin to understand the serious implications of the buyback-option schemes that now dominate the market.

Also, the more cases that are brought and argued regarding option back-dating, the more legal precedents that may be set to make it easier to prosecute fraud regarding stock buybacks or to bring class action suits in this area by tort lawyers.

Even a single investigation of fraud involving false statements and stock buyback programs could be significant for billions of dollars of capital flows in the equity markets.