Apple has given warning that it could be removed from the highly regarded Nasdaq Global Select Market, as the maker of iPod and Macintosh acknowledged for the first time that it was the subject of a federal investigation into its stock option practices.

The company, which last June revealed “irregularities” in its stock option grants and took an $84 million (£43 million) charge six months later, said that the investigation by the US Securities and Exchange Commission (SEC) could lead to further restatements and delays to its financial reporting.

“The resolution of these matters will be time consuming, expensive and will distract management from the conduct of the company’s business,” Apple said yesterday in a regulatory filing. “Furthermore, if the company is subject to adverse findings in litigation, regulatory proceedings or government enforcement actions, the company could be required to pay damages or penalties to have other remedies imposed, which could harm its business, financial condition, results of operations and cashflows.”

Apple also noted that the investigation could “subject the company to a potential delisting from the Nasdaq Global Select Market”. That market, which started last July, comprises about one third of the companies listed on the Nasdaq exchange. Membership confers an extra degree of respectability on a company’s accounting and corporate governance proceedures and, accordingly, gives investors an increased level of confidence.

The SEC is investigating the way that Apple accounted for “backdated” options, which the company has admitted that it granted to key employees, including Steve Jobs, the chief executive. The most sensitive case under investigation relates to options granted to Mr Jobs in December 2001. The award was backdated to October, when Apple’s share price was lower, thereby guaranteeing a much bigger profit for Mr Jobs if the options were cashed in.

Apple acknowledged in December that it had falsified records to show that a board meeting was held to approve the move when no such meeting took place. Apple also said that Mr Jobs was not aware of accounting implications of backdating and that he returned the options so that he would not benefit from the practice.

Apple also disclosed yesterday that, in the last quarter of 2006, it had given Mr Jobs $204,000 towards the running of a $40 million Gulfstream V jet aircraft that the board had awarded the founder nearly six years ago. The company said that it awarded the sum for expenses incurred by Mr Jobs while using his aircraft for business purposes. Last year Mr Jobs did not incur any expenses relating to the Gulfstream. In previous years, however, he was reimbursed as much as $1.16 million in one quarter for flying his aircraft on company errands. The reimbursement arrangement has been in place since March 2002, after Apple gave Mr Jobs the luxury aircraft in May 2001 for returning to glory the once-struggling business.

Mr Jobs takes an annual salary of $1. In 2001, however, management awarded him the Gulfstream, costing the company a total of $90 million when various associated expenses and costs are included.

Trail of error

June 29, 2006: Apple says that an internal review has discovered irregularities relating to the issuance of certain stock options between 1997 and 2001, including a grant to Steve Jobs, chief executive

October 4: Mr Jobs admits that Apple will have to restate some of its past financial results because it had changed the grant date of stock options made on 15 days. Fred Anderson, then Apple’s chief financial officer, resigns from the board with immediate effect

October 5: It emerges that a Californian lawyer is investigating several individuals in connection with stock option manipulations

December 29: Apple says that it will restate financial results going back to 2002 and take an $84 million (£43 million) charge after unearthing evidence that the board committee misdated 6,428 stock option grants. It admits falsifying records relating to the grant of 7.5 million options to Mr Jobs

January 23, 2007: It emerges that the Securities and Exchange Commission (SEC) is not satisfied with Apple’s internal report and has asked it for documents relating to its own inquiry into the company’s accounting

February 2: Apple publicly admits that the SEC is investigating its stock option grants and says that the company could be delisted from the Nasdaq Global Select Market

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