January 16, 2005
What Puzzles Me About the Google Stock Option Affair
Posted by joanheminway

Chritine raises some good points about SEC adjudications in her earlier post, "Google Gets Deferred Adjudication." I admit, however, that I shake my head when I read the disclosure that Christine quotes in her post. At the risk of sounding too much like a Supercilious law professor (and perhaps I am more sensitive to the issue because I am teaching a Securities Regulation class this semester), I wonder how Google failed to avail itself of an exemption from registration for the option grants and exercises referenced in the disclosure.

The key, foundational case in this area, S.E.C. v. Ralston Purina Co., 346 U.S. 119 (1953), finds that the private offering exemption from registration in the Securities Act of 1933, as amended, is not available for an offering of stock to key employees. In that case, the Court states that "[t]he exemption, as we construe it, does not deprive corporate employees, as a class, of the safeguards of the Act." Although registration and exemption requirements have evolved quite a bit since 1953, these words remain true. Perhaps it takes a highly visible set of circumstances every 50 years or so to remind us all of their importance . . . ?

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