SEC eyes EA in options probe

The bad news is Electronic Arts this week stated publicly that it has come under Securities and Exchange Commission (SEC) scrutiny for practices associated with the granting of options to employees.

The good news: investors don't care.

In a filng dated yesterday, the publisher acknowledged that six days earlier it had received notification of "an informal inquiry" from the SEC. The filing continues, saying that the SEC is "requesting certain documents and information relating to EA's stock option grant practices from January 1, 1997 to the present."

The SEC is currently looking into options-granting protocols at more than 100 companies, including game publishers Activision Inc., THQ Inc., and Take-Two Interactive Software Inc. (GameSpot parent company CNET Networks is among those companies being investigated.)

Specifically, the regulatory agency is looking into practices at publicly traded companies, seeking to determine if the companies retroactively awarded stock options to employees at an artificially low strike price. The practice invariably guarantees that those employees make money off the options, regardless of recent stock-price activity.

In spite of the news, shares of Electronic Arts continue to rise, steadily climbing out of a summer-long funk--today, shares of the company are up fractionally, trading as high as $57.61; a far cry from the trading price of $39.99 charted on June 6, 2006.

In related news, in the same filing that outlined the SEC probe, EA said the shareholder derivative complaint filed previously by Plumbers & Pipefitters Local No. 572 Pension Fund had been dropped by the group. "On September 14, 2006, the court signed an order dismissing the complaint," EA said in the filing, which continued, stating "no compensation was paid by EA to the plaintiff or its attorneys."