Networking chipmaker Broadcom Corp. (Nasdaq: BRCM) is the latest telecom sector firm to be pulled into the stock-options brouhaha now sweeping Wall Street.

The company announced today that “analyst and media” reports concerning the company’s options granting practices had attracted the attention of the Los Angeles office of the Securities and Exchange Commission (SEC) . Broadcom says it learned Friday that the agency will soon open an "informal” inquiry on the matter. (See Options Scare Hits SafeNet, Juniper.)

"We are working proactively and with the highest degree of integrity to put all questions concerning this topic behind us," said Broadcom CEO Scott McGregor in the statement.

Broadcom wasn't saying much about the issue today, but it did offer some clarification on the SEC's involvement. "It's important to note that the SEC has not commenced an 'investigation' of Broadcom," says Broadcom spokesman Bill Blanning in an email response to Light Reading Monday. "We understand that the staff of the L.A. regional office of the SEC is simply requesting information from the company, which we will provide on a voluntary basis."

Broadcom joins at least four other telecom sector companies that have drawn inquiries from the SEC about how they handled stock option grant dates. (See SafeNet Gets Subpoenaed, Vitesse Gets Subpoenaed, Comverse CEO, CFO Resign, and Feds Call on Juniper.)

Broadcom's involvement in the options scandal started with the mid-March release of a report by the Center for Financial Research and Analysis (CFRA). The report identified 17 companies as being "at risk" for having back-dated option grants during the five-year period ended in 2002.

“Back-dating” refers to the practice of retroactively altering the grant date of stock options to coincide with low-points in the company’s stock price. This maximizes the value of the stock when it trades at relatively higher prices in the future: Grant low, sell high. The CFRA studied a group of 100 companies, matching their options grant dates with stock price low points during a five-year period. Options grants occurring near the low points were considered “at risk." The report said Broadcom had at least three such grant dates in the five-year period.

Articles in The Wall Street Journal, the Los Angeles Times, and several others appeared May 18 mentioning Broadcom in connection with the CFRA study and options back-dating.

Broadcom says it opened an internal investigation on the matter the same day. The investigation, which is being conducted by its outside legal counsel, is studying all options grants dating back to the company's 1998 IPO.

If the options worries have had an impact on Broadcom’s stock price it has been a gradual one. The shares opened at $37.95 on May 18 -- the day its internal investigation began -- and the price has fallen steadily since. Broadcom shares were trading up $0.37 (1.26%) to $29.70 in midday trading on Monday.

Broadcom also reports that a shareholder filed a lawsuit May 26 in the Central District Court of California charging the company with "misconduct related to executive stock-option grants." It is unclear whether the complaint involves back-dating. Broadcom says the lawsuit has no merit and plans a "vigorous" defense. Another chipmaker, Vitesse Semiconductor Corp. (Nasdaq: VTSS) found itself embroiled in the issue last month -- and with stunning results. The firm ended up firing three of its top executives, including the CEO. (See Vitesse Execs Get the Axe.)

While Broadcom makes chips for a variety of communications applications, it's been increasingly visible in IPTV circles over the past 18 months. It is part of a small group of chipmakers supplying MPEG-4 and high-definition chipsets to IPTV set-top box makers. The wide availability of such chipsets is seen as pivotol to the rollout of commercial IPTV service, as they'll help drive down the service provider cost of deploying what many hope to be a mass-market product. (See Broadcom Compresses Video.)

— Mark Sullivan, Reporter, Light Reading