Options backdating is the practice of granting an employee stock option that is dated prior to the date that the company actually granted the option. This practice raises a number of legal and accounting issues. The practice of backdating itself is not illegal, nor is granting of discounted stock options. What is illegal is the improper disclosures, both in financial records and in filings with the United States Securities and Exchange Commission (SEC).

In 1992 the SEC imposed a rule requiring companies to report executive stock options in detail. Even after the rule, some executives could legally delay reporting option grants for so long that it was virtually impossible to figure out whether any individual grant had been backdated.

Since the Enron scandal, Congress enacted Section 409A of the Internal Revenue Code to deal with such non-qualified deferred compensation. Backdated stock options would be considered discounted stock options triggering additional taxes and penalties at vesting or exercise. Most of the legal issues arising from backdating are a result of the grantor falsifying documents submitted to investors and regulators in an effort to conceal the backdating.