SEC probes Grand Theft Auto firm

Take Two has been criticised for the content of its games

Take-Two Interactive Software, the firm behind computer game Grand Theft Auto, has confirmed it faces a stock options probe by the US finance watchdog.

The Securities and Exchange Commission is investigating whether Take-Two failed to correctly disclose a number of backdated stock options.

Backdating is a means by which stock options can be made more profitable.

It is legal, but a company has to fully inform shareholders of the practice and ensure it is properly accounted for.

Backdating

The latest development at Take-Two comes as it faces scrutiny for other financial irregularities, including overstated profits, and controversial games.

Five board members, including the chief executive were recently ousted by the shareholders.

The key issue regarding stock options - which were used as a common way to reward staff during the dotcom boom - is the practice of backdating.

If firms backdate options to a date earlier than when they were awarded, it means they can choose a point when the share price was cheaper.

This means when the option is finally exercised, more profit can be made.

More than 150 firms implicated in wrongful backdating have been probed by the finance watchdog, as well as undergoing internal enquiries - including big names like Apple.

As Take Two faces problems, analysts say the publisher, whose Grand Theft Auto has been highly successful, needs to find another similarly strong product to improve its outlook.

Despite the game's success, it has been criticised for disguised sexual content.