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Dawn Kawamoto

Staff Writer, CNET

Google has settled with federal and state regulators over allegations the company violated securities laws in the handling of its stock options.

The Securities and Exchange Commission also confirmed Thursday that it will not proceed with any enforcement action against Google over a high-profile interview with company co-founders Larry Page and Sergey Brin in Playboy magazine before they filed for their initial public offering. Companies are prohibited from promoting their companies before going public.

The Playboy article and stock options inquiry both had threatened to delay Google’s IPO.

Under terms of the agreement, the search giant agreed to cease and desist from committing or violating any provisions under the Securities Act of 1933, according to the company’s filing with the SEC. Google, without admitting or denying guilt in the matter, will not have to pay any financial penalty. The company also settled similar charges brought by the California Corporations Commissioner.

Before the debut of its closely watched IPO, the SEC began an informal inquiry into $80 million in stock options Google had issued to employees and consultants between 2002 and 2004. Regulators were concerned the options were distributed before Google registered the IPO offering and without Google providing financial information about the company.

“As a result, Google employees and other persons accepted Google securities as part of their compensation without the legally required disclosures,” according to the SEC filing.

In a move to resolve the issue, Google, prior to its IPO, offered to rescind 28 million options and buy them back from employees and other recipients at their strike price. At the time, that gesture was not expected to garner many takers because the strike price the recipients would have received would have been far less than the anticipated value of the shares once they began trading.