The American Records Management Association (ARMA) reports that audit deficiencies in an options-tracking product, EquityEdge, are at the center of the widening scandal over the backdating of stock options. EquityEdge is used to track stock options granted to executives but its ‘limited’ audit trail capability makes it possible to change option data ‘without leaving a trace’. The ARMA release points out that ‘from a records management perspective, this means that records maintained by the software have no guarantee of integrity’.
SEC
Some 31 US companies (none in the oil sector) are currently under investigation for backdating stock options. Others have received subpoenas from the SEC to ensure that records are preserved even though no formal inquiry has been opened. Several executives have resigned or been fired because of issues relating to ‘document integrity’ in the options granting process.
E*Trade
Options backdating highlights the importance of audit trails. Records managers should keep finance and IT aware of audit trails’ value in records integrity and help them ensure that all software has suitable audit trail capabilities. E*Trade, the current owner of EquityEdge, states that version 7.0 (due out later this year) will record changes to individual option data and show which user made the change.
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