Full opinion text
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED COMPLAINT. DAVID 0. CARTER, District Judge. Before the Court is Defendants Quest Software Inc., Vincent C. Smith, M. Brinkley Morse, Michael J. Lambert, Douglas F. Garn, David M Doyle, Jerry Murdock, Jr., and Kevin Brooks’ Motion to Dismiss First Amended Complaint (“Defendants’ Motion”) Pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) and the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u, et seq. The Court finds the matter appropriate for decision without oral argument Fed. R.Civ.P. 78; Local R. 7-15. Accordingly, the hearing set for September 10, 2007 was removed from the Court’s calendar. After considering the moving, opposing, and replying papers, the Court hereby GRANTS IN PART AND DENIES IN PART Defendants’ Motion and DISMISSES the specified portions of Plaintiffs First Amended Complaint (“FAC”) WITHOUT PREJUDICE. I. BACKGROUND A. The Parties Plaintiff Middlesex Retirement System (“Plaintiff’) is a Massachusetts pension fund, established on December 2, 1911. Plaintiff is seeking class certification for all those persons or entities who purchased Quest securities (“the securities”) during the period of November 9, 2001 through July 3, 2006 (“the Class Period”). Defendant Quest Software, Inc., (“Quest” or “the Company”) is a California corporation that designs, develops, distributes, and supports software products that work with other software applications and database management systems. Quest’s common stock was registered with the Securities and Exchange Commission (“SEC”) pursuant to the Exchange Act and traded on the NASDAQ National Market. Defendant Vincent C. Smith (“Smith”) has served as Chairman of the Board of Directors of Quest (“the Board”) since 1998, Chief Executive Officer (“CEO”) since April 1997, and as a director since 1995. Smith signed each Form 10-K and 10-K405 during the Class Period. Pi’s First Am. Compl. ¶ 21. For the Form 10-Ks and 10-Qs issued from August 14, 2002 through the end of the Class Period, Smith signed the Certification of the CEO pursuant to Exchange Act Rule 13A-14 and 15D-14, as adopted pursuant to § 302 of the Sarbanes-Oxley Act of 2002 (“SOX”), and the Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to SOX § 906 (“ § 1350 Certification”). Id. ¶22 During the Class Period, Smith was granted at least 1,585,000 stock options, and sold at least 445,300 shares of Quest stock for proceeds of approximately $6,875,382.82. Id. ¶¶ 23-24. Defendant M. Brinkley Morse (“Morse”) served as Quest’s Senior Vice President, Corporate Development from April 2005 until his resignation on or about November 24, 2006. Morse previously served as Vice President, Finance and Operations of the Company from January 2001 through May 2003, and as Chief Financial Officer from May 2003 through April 2005. Morse signed each Form 10-K and 10-K405 filed in years 2002 through 2005. Additionally, Morse signed the Certification of the CFO pursuant to Exchange Act Rule 13A-14 and 15D-14 and the § 1350 Certification. Id. ¶ 28. During the Class Period, Morse was granted at least 850,000 stock options. Id. ¶ 30. Morse allegedly declined to be interviewed by the Special Committee for the Company’s investigation into the stock option matters underlying the allegations in Plaintiffs FAC; Morse resigned instead. Id. ¶ 27. Defendant Michael J. Lambert (“Lambert”) served as Quest’s Senior Vice President of Finance from November 2004 until April 2005, when he became the Company’s Chief Financial Officer. Lambert is Quest’s current CFO. Lambert signed the Form 10-K filed in 2006. For the Form 10-Ks and 10-Qs from May 10, 2005 through the end of the Class Period, Lambert signed the Certification of the CFO pursuant to Exchange Act Rule 13A-14 and 15D-14 and the § 1350 Certification. Id. ¶ 35. Defendant Douglas F. Garn (“Garn”) has served as Quest’s President since February 2005. Garn previously served as Quest’s Vice President, Worldwide Sales from January 1998 to January 2002, and returned to this position in January 2003 through February 2005. During the Class Period, Garn was granted at least 480,000 stock options and sold at least 65,000 shares of Quest stock for proceeds of approximately $983,700. Id. ¶¶ 39-40. Defendant David M. Doyle (“Doyle”) served as a Director of Quest from 1987 until June 2004. Doyle served as Quest’s President until March 2003. Doyle was a member of the Audit Committee of the Board of Directors (“the Audit Committee”) from 1999 to 2001. Doyle signed each Form 10-K and 10-K405 filed in years 2002 through 2004. During the Class Period, Doyle was granted at least 100,000 stock options, and sold at least 1,974,543 shares of Quest stock for proceeds of approximately $26,679,352.74. Id. ¶¶ 45-46. Defendant Jerry Murdock, Jr. (“Mur-dock”) has been a Director of Quest since April 1999. Murdock was a member of the Compensation Committee of the Board of Directors (“the Compensation Committee”) from 1999 through February 2005. The Compensation Committee allegedly reviews and approves the compensation and benefits for the Company’s executive officers and administers the Company’s 1999 Stock Incentive Plan, under which the options at issue in this case were granted. Id. ¶ 49. Murdock is currently a member of the Audit Committee, of which he was formerly the Chairman from 1999 through July 2005. In addition to signing each Form 10-K and 10-K405 filed by Quest during the Class Period, Murdock also signed the Audit Committee reports contained in the proxy statements filed by the Company with the SEC in years 2002 through 2005. During the Class Period, Murdock sold at least 202,274 shares of Quest stock for proceeds of approximately $2,189,454.29. Id. 153. Defendant Kevin Brooks (“Brooks”) was Quest’s Vice President and Corporate Controller (the Company’s principal accounting officer) from September 2000 until October 20, 2006. On October 20, 2006 Brooks was reassigned in connection with Quest’s Special Committee investigation of the stock option matters underlying the allegations in Plaintiffs FAC. Id. ¶ 56. Brooks signed each Form 10-Q, 10-K, and 10-K405 filed during the Class Period. During the Class Period, Brooks was granted at least 40,000 stock options, and sold at least 57,620 shares of Quest stock for proceeds of approximately $891,691.87. Id. ¶ 59. Defendants Smith, Morse, Lambert, Garn, Doyle, Murdock, and Brooks are collectively referred to as “Individual Defendants.” Plaintiff alleges that, by virtue of their positions at Quest, the Individual Defendants had access to the adverse and undisclosed information about the operating results and financial condition of the Company. Id. ¶ 63. B. Stock Options and Backdating Given the media attention and the numerous national scandals, there is widespread public awareness of various companies’ backdating of stock options. Nevertheless, in the interest of thoroughness and a proper understanding of the scheme Plaintiff has alleged, the Court will briefly restate the nature of stock options and “backdating.” A stock option gives an employee a right to buy company stock in the future at the price of the stock on the date of the grant. This price is referred to as the “exercise price” or the “strike price,” and the date is referred to as the “measurement date.” If the stock price rises, the options have value. The plan under which an option is granted will often have a time frame during which the option cannot be exercised; i.e., the person who holds the option cannot take advantage of the option for an amount of time defined by the option plan. Once this time has elapsed, the option is “vested” and can be exercised at will by the grantee. As described by U.S. District Judge William Alsup: “Once exercisable, the options are worth the difference between the exercise price and the current market price. If the stock price falls, the options are worthless. Options with an exercise price equal to the stock’s price as of the grant date are referred to as ‘at-the-money’ options. Those with an exercise price lower than the stock’s market price are referred to as ‘in-the-money’ options.... For financial reporting purposes, companies granting in-the-money options have to recognize compensation expenses equal to the difference between the market price and the exercise price. No compensation costs need be recognized for at-the-money options, for the company does not forego any revenue by granting them. The motive for backdating is to avoid a ‘hit to the earnings,’ i.e., a compensation expense, while still awarding in-the-money options. Those responsible simply backdate the grants to a date where the stock price was attractively low and pretend that the grant was awarded on the earlier date rather than the real date. [This creates a ‘paper profit.’] Since the paperwork shows that the exercise price is the same as the market price on the phony grant date, they pretend no need exists to recognize an expense ... The company is in effect granting in-the-money options without recognizing the attendant compensation expense.” In re Zoran Corp. Deriv. Litig., 511 F.Supp.2d 986, 996-67 (N.D.Cal.2007). Through this process, the companies accrue a double benefit. First, companies are able to avoid reporting a higher compensation expense and paying the taxes associated therewith, thereby artificially inflating net income and the price of their stock. Second, those being granted options (often directors and management) can secretly inflate their own compensation using improper methods that are not disclosed to the company’s shareholders or the public at large. See PL’s First Am. Compl. at ¶ 83. Since this backdating process has entered the public consciousness, more than “190 companies have either announced internal reviews of their own option practices for apparent backdating or been placed under state or federal investigation for the practice.” Id. ¶ 80. Once the Sar-banes-Oxley Act of 2002 (“SOX”) and the resulting SEC rules became effective in August of 2002, stock option grants were required to be reported within two business days. Id. ¶82. Previously, stock option grants were not required to be reported until after the end of the fiscal year. Thus prior to August 2002, a granting body could potentially grant the option, but then at the end of the fiscal year, before reporting the option and its corresponding grant date, look back on the stock’s performance for the past year and change the measurement date of the stock to reflect the best price for the year. By only permitting a two day window between the granting of an option and the reporting of the option, SOX attempted to curtail the ability of companies to engage in this backdating process. No longer could option-granting bodies look back over the past year.and select the best date, post-SOX this “look back” period was restricted to two business days. C. Alleged Backdating at Quest Plaintiff has provided a highly detailed time line documenting the alleged backdating that occurred at Quest. The Court does not make any determination regarding the ultimate validity or truth of Plaintiffs statements, but must nevertheless consider them true for purposes of this motion. Tellabs, Inc. v. Makor Issues & Rights, Ltd., — U.S. —, 127 S.Ct. 2499, 2509, 168 L.Ed.2d 179 (2007); Guerrero v. Gates, 442 F.3d 697, 703 (9th Cir.2006). On June 9, 1999, the stockholders of Quest adopted the 1999 Stock Incentive Plan (the “1999 Plan”) for Company employees. Plaintiff alleges that pursuant to the 1999 Plan, all of the options granted to Quest employees or non-employee Board members of the kind that are the subject of Plaintiffs FAC (the “incentive options”) would have an exercise' price per share not less than one-hundred percent (100%) of the fair market value per share of Quest common stock on the option grant date. PL’s First Am. Compl. ¶ 88. Plaintiff further alleges that under “the [1999] Plan, (i) there would be no compensation expense to the Company, and (ii) there would be an incentive for the employee to do his or her part to increase the value of Quest stock from the grant date so that the option would have value.” Id. ¶ 89. The Board’s Compensation Committee administered the Plan pursuant to which the stock options at issue in Plaintiffs FAC were granted. Plaintiff has made several allegations regarding option grants to the Individual Defendants. Quest issued approximately four million options in 2000. One of the recipients of these options was Defendant and then Vice President Garn, who received 80,000 option grants that reportedly had an exercise price based on the April 14, 2000 closing market price for Quest stock. According to Plaintiff, these grants were reported to have occurred on the very day that Quest’s stock traded at its lowest price per share for that year. Id. ¶ 6(a). Quest also issued over 8.9 million options during 2001, with exercise prices based on the March 28, 2001, April 4, 2001, and October 1, 2001 closing market prices for Quest stock. Defendant and then-CFO Morse received 250,000 option grants based on the March 28, 2001 closing market price for Quest stock. One month later, Quest’s stock price was trading 143.09% higher than the purported option grant date. Also in 2001, Defendant and CEO Smith received 300,000 option grants, Defendant Doyle received 100,000 option grants, Defendant Garn received 300,000 additional option grants, and Defendant Morse received an additional 100,000 option grants. Eyal M. Aronoff (“Aronoff’), a non-party to this suit, President of a company acquired by Quest, and Chief Technical Officer of Quest from September 2000 to June 3, 2003, received 200,000 option grants. All of these grants had exercise prices based on the April 4, 2001 closing market price for Quest stock. One month later, Quest’s stock price had risen 123.16% from the April 2001 closing market price. Later that same year, Defendant Smith received 485,000 option grants, Defendant Garn received 100,000 option grants, Defendant Morse received 300,000 option grants, Defendant Brooks received at least 20.000 option grants, and Aronoff received 550.000 option grants, all of which had reported exercise prices based on the October 1, 2001 closing market price for Quest stock. According to Plaintiff, these grants were reported to have occurred within two days of the lowest price per share for Quest’s stock of that year. Id. ¶ 6(b)(iii). In 2002, Defendant Smith received 800,000 option grants, Defendant Morse received 200,000 option grants, and Aronoff received 600,000 option grants, all of which had reported exercise prices based on the August 7, 2002 closing market price for Quest stock. These grants occurred within two days of, and three cents above, the lowest price per share for Quest stock for the first eight months of that year. Id. ¶ 97. In total, Defendant Smith received 1.585.000 option grants, Defendant Morse received 850,000 option grants, Defendant Doyle received 100,000 option grants, Defendant Garn received at least 480,000 option grants, Defendant Brooks received 40.000 option grants, and Aronoff received 1.350.000 option grants. Plaintiff alleges that all of these options were granted for prices below the fair market value of the Company’s stock; yet the Company failed to establish a compensation expense. Plaintiff alleges that because of the difference between the exercise price and the market price on the actual dates the option grants should have been reported as compensation, the Company had lower earnings than those that were reported, and therefore Defendants’ option granting practices have caused false and misleading financial reporting under GAAP. Under the Charter of Quest’s Compensation Committee of the Board of Directors, the Compensation Committee has the responsibility of supervising the administration of the Company’s 1999 Stock Incentive Plan. Defendant Murdock served on the Compensation Committee during the Class period and, Plaintiff alleges, approved or accepted the stock option grants. Under the Charter of Quest’s Audit Committee of the Board of Directors, the Audit Committee had the responsibility of reviewing and consulting with management and the independent auditor regarding the quality, adequacy, and effectiveness of Quest’s internal financial reporting controls. Additionally, Plaintiff alleges it was the Audit Committee’s responsibility to review the financial statements issued during the relevant time period. Defendants Doyle and Murdock served on the Audit Committee and either approved or accepted the financial statements. D. False and Misleading Statements Made During the Class Period Plaintiff has alleged that Defendants either made, or caused to be made numerous false and misleading statements during the Class Period. Id. ¶ 109. The crux of Plaintiffs assertion is that by pricing the options below the stock’s fair market value on the actual grant date, Defendants were able to bring an instant paper profit to themselves and others (i.e., Aronoff). In turn, by failing to properly record the costs associated with the options in its financial statements, Quest’s costs were understated, and its profits were overstated during the fiscal periods in which the options were granted. This further increased the profit to Defendants by artificially elevating the market price of Quest’s stock. As Quest is a public company traded on the NASDAQ exchange, these overstatements were represented to shareholders and the public-at-large by way of various SEC-required forms, including Form 10-Qs and 10-Ks, among others. I. Form 10-Qs, 10-Ks, and 10-K405s Plaintiff alleges that each Form 10-Q, from the third quarter of fiscal 2001 through the end of fiscal 2004, was false and misleading as a result of Defendants Smith, Morse, and Brooks allowing Company employees to manipulate the measurement dates of employee stock options to achieve the aforementioned effect of creating a “paper profit.” Id. ¶ 113. Further, Plaintiff alleges that the collective actions of Defendants Quest, Smith, Morse, and Brooks caused the Company’s financial statements to under-report charges to its stock-based compensation expense, which in turn inflated the Company’s net income during the Class Period. Id. ¶ 114. Specifically, Defendants Morse and Brooks both signed each Form 10-Q for the third quarter of fiscal 2001 through the end of fiscal 2004. Additionally, Defendants Smith and Morse both signed certifications for each Form 10-Q for the second quarter of fiscal 2002 through the end of fiscal 2004 pursuant to Exchange Act Rule 13A-14 and 15D-14, as adopted pursuant to § 302 of SOX, and 18 U.S.C. § 1350, as adopted pursuant to § 906 of SOX (hereinafter, the “SOX Certifications”). These signatures certified that the reports did not contain any untrue statements of material fact; and that the financial statements fairly presented in all material respects the financial condition, results of operations and cash flows of the Company. See 18 U.S.C. § 1350(b). Plaintiff alleges that each Form 10-Q for the first quarter of fiscal 2005 through the first quarter of fiscal 2006 was false and misleading as a result of Defendants Smith, Brooks, and Lambert allowing Company employees to manipulate the measurement dates of employee stock options to achieve the aforementioned effect of creating a “paper profit.” Id ¶ 117. Defendants Lambert and Brooks both signed each Form 10-Q filed for the first quarter of fiscal 2005 through the first quarter of fiscal 2006. Defendants Smith and Lambert also each signed SOX Certifications for each Form 10-Q for the first quarter of fiscal 2005 through the first quarter of fiscal 2006. Plaintiff also alleges that each Form 10-K or Form 10-K405 filed in years 2002 through 2005 was false and misleading. Specifically, the Form 10-K405 filed in 2002 and the Form 10-Ks filed in 2003 and 2004 were signed by Defendants Smith, Doyle, Morse, Brooks, and Murdock. The Form 10-K filed in 2005 was signed by Defendants Smith, Morse, Brooks, and Murdock. Additionally, Defendants Smith and Morse both signed SOX Certifications for each Form 10-K filed in years 2003 through 2005. Plaintiff also alleges that the Form 10-K filed with the SEC in 2006 was false and misleading. The Form 10-K filed in 2006 was signed by Defendants Smith, Lambert, Brooks, and Murdock. Defendants Smith and Lambert also signed the 2006 SOX Certifications. ii. Proxy Statements & Form 4s Beyond the Form 10-Ks, 10-K405s, and 10-Qs, Plaintiff is alleging that various proxy statements also contained false or misleading statements. The proxy statement filed with the SEC on April 30, 2002 (the “2002 Proxy Statement”) represented that the value of the Company’s stock options was “calculated on the basis of the fair market value of [Quest’s] Common Stock on the exercise date.” Id. ¶ 130. The 2002 Proxy Statement also disclosed the option grants to Defendants Smith, Garn, Doyle, Morse, and non-party Aro-noff in 2001. The proxy statement filed with the SEC on April 30, 2003 (the “2003 Proxy Statement”) stated that “the stock options granted in the last fiscal year were ‘granted at an exercise price equal to the fair market value of Quest Common Stock on the grant date.’ ” Id. ¶ 131. Plaintiff alleges that Defendants Smith, Morse, Doyle, Brooks, and Murdock caused the Company to file both the 2002 Proxy Statement and 2003 Proxy Statement. In the 2002 Proxy Statement, the Compensation Committee stated that “[n]one of [their] executive officers received non-performance-based compensation in an amount exceeding the limit” in Section 162(m) of the Internal Revenue Code, which prohibits a federal income tax deduction to publicly held companies for compensation paid to certain executive officers, to the extent that compensation exceeds $1.0 million per covered officer in any fiscal year. Additionally, the Compensation Committee stated that it “does not anticipate that non-performance-based compensation to be paid to [Quest’s] executive officers in 2002 will exceed” the limit in Section 162(m). Id. ¶ 133. Although Plaintiff has not provided quoted language from subsequent proxy statements, Plaintiff alleges that the Compensation Committee made similar statements in the 2003 Proxy Statement as well as the proxy statement filed with the SEC on May 19, 2004 (the “2004 Proxy Statement”). Defendant Murdock signed the Compensation Committee reports in the 2002, 2003, and 2004 Proxy Statements. The proxy statements between 2002 through 2005 all contained statements by the Board’s Audit Committee, recommending that the audited financial statements from the previous fiscal year be included in the Company’s Annual Report on Form 10-K for that year. Thus, the Audit Committee was endorsing the prior financial statements. Defendant Murdock signed the Audit Committee reports in the 2002, 2003, and 2004 Proxy Statements. Quest also filed a proxy statement with the SEC on July 11, 2005 (the “2005 Proxy Statement”); Defendant Murdock signed the Audit Committee report in this statement as well. Plaintiff alleges that the 2002 through 2005 Proxy Statements contained additional misstatements, e.g., by not disclosing the compensation granted via the allegedly backdated options, the Summary Compensation Tables from the proxy statements failed to reflect the proper compensation awarded to Defendants. Specifically, Plaintiff alleges that the 2002 Proxy Statement failed to report the compensation of (1) Defendant Garn in 2000 as a result of his option grants in 2000; (2) Defendants Smith, Doyle, Garn, Morse, and non-party Aronoff, as a result of their option grants in fiscal year 2001; and (8) Defendants Smith, Morse, and non-party Aronoff, as a result of their option grants in 2002. Id. ¶ 142. The amount of this unreported compensation' is, according to Plaintiff, material. Plaintiff alleges that the Company made additional similar material misstatements in the 2003, 2004, and 2005 Proxy Statements. As with the 2002 Proxy Statement, Plaintiff alleges that these misstatements were the result of the failure to disclose the compensation awarded via the option grants. Id. ¶¶ 142-44.' From the 2003 Proxy Statement, Plaintiff alleges that Defendants failed to disclose the compensation given to (1) Defendants Smith, Doyle, Morse, and non-party Aronoff, as a result of the option grants received in 2001; and (2) Defendants Smith, Morse, and non-party Aronoff, as a result of the option grants received in 2002. Id. ¶ 142. From the 2004 Proxy Statement, Plaintiff alleges that Defendants failed to disclose the compensation given to (1) Defendants Smith, Garn, and Morse, as a result of the option grants received in 2001; and (2) Defendants Smith and Morse in fiscal year 2002 as a result of the option grants received in 2002. Id. ¶ 143. From the 2005 Proxy Statement, Plaintiff alleges that Defendants failed to disclose the compensation given to Defendants Smith and Morse in fiscal year 2002 as a result of options received in 2002. Id. ¶ 144. Plaintiff has also alleged that several Form 4s’ filed by Defendants were false and misleading in that the forms failed to represent the actual dates on which the options were granted. Specifically, the Form 4s’ filed by Defendant Brooks on August 12, 2004, November 9, 2004, November 15, 2004, and February 8, 2005 were allegedly misleading, Additionally, the Form 4s’ filed by Defendant Garn oh December 12, 2005 and March 10, 2006 falsely represented the dates on which the options were granted. E. Reports of Backdating at Quest and Damage to Quest’s Stock Price In May 2006, reports of possible backdating at Quest began to emerge. On May 19, 2006, a Goldman Sachs research report revealed that Quest had “highly suspicious” stock option grant dates. The Goldman Sachs report stated that management had explained that the grant dates at issue “are tied to specific board meetings and were thus not chosen at a later date.” Id. ¶ 150 at 39:20-23. This report was published before trading began on May 19, 2006. During trading on May 19, Quest’s stock price declined by 11.39%, from $15.98 per share to $14.16 per share. On May 22, 2006, after the close of trading, Quest issued a press release announcing the formation of a Special Committee (the “Special Committee”) to investigate . the stock option grant dates mentioned in the May 19, 2006 Goldman Sachs report. Quest’s stock price dropped again to $13.32 per share. On June 1, 2006, Quest announced that it had been contacted by the SEC regarding an informal inquiry relating to Quest’s past stock option granting practices. Two weeks later, on June 14, 2006, Quest announced that H. John Dirks (“Dirks”) was elected as a new director of Quest. The announcement also stated that Dirks would be a member of the Special Committee. Before trading began on July 5, 2006, the Company issued a press release (“the July 5 Press Release”) revealing that “the accounting measurement dates for many of the company’s stock option grants awarded during the period from the fall of 1999 and into 2002 were actually obtained subsequent to the measurement dates used for financial reporting purposes.” Id. ¶ 157. Thus, Quest’s statement was a clear admission that the Company had discovered instances of stock option backdating. Moreover, “the Special Committee [] determined, based on its preliminary analysis, that non-cash stock-based compensation expense should have been recorded ... and that the amount of such additional expense is expected to be material.” Id. The July 5 Press Release also stated that the financial statements and the related reports “for the periods from 2000 through 2005 and for the quarter ended March 31, 2006 should no longer be relied upon.” Id. ¶ 158. The July 5 Press Release noted that any restatements made as a result of the discovered backdating of stock options “would have the effect of decreasing reported amounts of income from operations, net income, net income per share and retained earnings contained in” the financial statements filed from 2000 through the quarter ending March 31, 2006. Id. ¶ 159. Following the July 5 Press Release, the Company’s stock dropped again to $12.86 per share at the end of trading on July 5, 2006. The drop in the Company’s stock now totaled 20.10% since May 18, 2006, the last trading day before the Goldman Sachs report was released. Notably, Plaintiff stated in its FAC that this 20.10% drop in stock is not attributable to a general downturn in the market — between May 19, 2006 and July 5, 2006, the NASDAQ National Market (the exchange on which Quest’s stock is traded) was up 3.18%, and the Russell 2000 Technology Index was down 2.29%. Both of these numbers are minimal compared to the 20.10% drop suffered by Defendants’ stock. Quest did not file a Form 10-Q for the second quarter of 2006. Instead Quest filed a Form NT 10-Q on August 10, 2006, stating that it would file restated financial statements for the periods from 2000 through the quarter ended March 31, 2006 as soon as practicable after the completion of the Special Committee’s investigation. Id. ¶ 163. On August 17, 2006, Quest filed a Form 8-K stating that the failure to file a timely Form 10-Q had led NASDAQ to a determination that Quest would be delisted from the NASDAQ and that Quest had requested a hearing to review the decision. On October 26, 2006, Quest filed a Form 8-K reporting that Defendant Brooks had been reassigned from his role as Corporate Controller and Principal Accounting Officer of the Company as of October 20, 2006. The October 20, 2006 Form 8-K stated that the reassignment was “in connection with Quest’s ongoing Special Committee investigation of stock option matters and was an interim decision pending completion of the Special Committee investigation and related restatement.” Id. ¶ 165. On November 24, 2006, Morse, then Quest’s Senior Vice President of Corporate Development, resigned from Quest. The purported reason for Morse’s departure was his refusal to cooperate with the Special Committee investigating the option granting procedures. On January 15, 2007, Quest issued a press release that the Special Committee had reported the findings of its investigation into the stock option dating practices. The Special Committee concluded that “accounting measurement dates for most of the stock option grants to employees from July 1998 to May 2002 differed from the recorded grant dates.” Id. ¶ 166. According to the Special Committee, the backdating of stock options ceased as soon as the Sarbanes-Oxley Act became effective. Additionally, the Company confirmed the need to restate some of the previously filed financial statements to properly “reflect the additional non-cash stock-based compensation expense that should have been recorded.” Id. In this same press release the company confirmed its preliminary estimate of a non-cash stock-based compensation expense of $150 million through the period ending March 31, 2006. The Company further announced on January 15, 2007 that the Special Committee had directed the Company to reprice the ascertained offending stock options to an exercise price equal to the fair market value of the Company’s common stock as of the corrected accounting measurement dates and to attempt to recover all or substantial portions of the after-tax gains the exeem tive officers realized from the exercise of those stock options. Quest also announced that the NASDAQ Stock Market LLC has given Quest until September 17, 2007 to file all delinquent periodic reports necessary to regain compliance with the SEC periodic reporting requirements. See Stipulation and Order Re: Response and Briefing Schedule for Plaintiffs’ Consolidated Am. Compl., In re Quest Software, Inc. Deriv. Litig., SA CV 06-0751 DOC (RNBx), at 1:14-17. F. Quest’s Violation of GAAP The financial statements filed throughout the Class Period were represented by Quest as having been prepared in accordance with GAAP. However, Plaintiff claims that these statements and public statements about the Company’s financial condition violated GAAP and SEC rules by failing to properly report and disclose the Company’s stock-based compensation expenses and net income during the Class Period. Moreover, the magnitude of Defendants’ alleged GAAP violations are substantial — currently estimated at $150 million. This estimate does not yet include the tax consequences or monetary tax obligations that will result from this additional expense and the effect on previous deductions taken under Internal Revenue Code Section 162m. Plaintiff has also alleged that, due to Quest’s accounting errors, Quest presented its financial results and statements in a manner that violated numerous principles articulated by the Accounting Principles Board (“APB”). See id. at ¶¶ 178(a)(g). G. Motive and Profit from the Misconduct Plaintiff has alleged that Defendants’ motive for backdating the stock options was to profit from an artificially low purchase price on their stock purchases, and to further increase the profit by taking advantage of the artificially inflated stock price resulting from inflated net income reports. During the Class period, as noted by the respective From 4s’: (1) Defendant Smith sold 445,300 shares for a total of $6,875,382.82; (2) Defendant Doyle sold 1,974,543 shares for a total of $27,679,352.74; (3) Defendant Garn sold 65,000 shares for a total of $983,700; (4) Defendant Murdock sold 202,274 shares for a total of $2,189,454.29; and (5) Defendant Brooks sold 57,620 shares for a total of $819,691.87. Collectively, Defendants Smith, Garn, Doyle, Murdock, and Brooks sold at least 2,744,737 shares of Quest stock during the Class Period for proceeds of approximately $38.5 million. H. Procedural Background On March 26, 2007 Plaintiff filed its FAC. Plaintiffs FAC contains three claims against Quest and the Individual Defendants. Claim I is against Defendants Quest, Smith, Morse, Lambert, Doyle, Murdock, and Brooks for violation of § 10(b) of the Exchange Act and SEC Rule 10b-5 (securities fraud). Claim II is against Defendants Quest, Smith, Morse, Lambert, Garn, Doyle, Murdock, and Brooks for liability pursuant to § 20(a) of the Exchange Act (control person liability). Claim III is against Defendants Smith, Brooks, Garn, Doyle, and Murdock for violation of Section 20A of the Exchange Act (insider trading). Having recited the relevant facts and allegations, the Court will now turn to the applicable legal standard. II. LEGAL STANDARD Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiffs allegations fail to state a claim upon which relief can be granted. Once it has adequately stated a claim, a plaintiff may support the allegations in its complaint with any set of facts consistent with those allegations. Bell Atlantic Corp. v. Twombly, — U.S. —, —, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007); see Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.1988) (stating that a complaint should be dismissed only when it lacks a “cognizable legal theory” or sufficient facts to support a cognizable legal theory). Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove “no set of facts” in support of its claim that would entitle it to relief. Bell Atlantic, 127 S.Ct. at 1968 (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The Court must accept as true all factual allegations in the complaint and must draw all reasonable inferences from those allegations, construing the complaint in the light most favorable to the plaintiff Guerrero v. Gates, 442 F.3d 697, 703 (9th Cir.2006); Balistreri, 901 F.2d at 699. Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir.2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir.1996)); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000). Additionally, fraud claims must be pled with more particularity than other claims. Federal Rule of Civil Procedure 9(b) provides that, “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed. R. Civ. P. 9(b). “Rule 9(b) ensures that allegations of fraud are specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.1985). Rule 9(b) therefore requires that allegations of fraud identify the parties to the misrepresentation such that each defendant is on notice of what specifically they are accused of Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir.1991). Through the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Congress has imposed heightened pleading standards on securities fraud actions. 15 U.S.C. §§ 78u-4(b)(l), (2). “The PSLRA significantly altered pleading requirements in private securities fraud litigation by requiring that a complaint plead with particularity both falsity and scienter.” In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1084 (9th Cir.2002) (citing Ronconi v. Lar- kin, 253 F.3d 423, 429 (9th Cir.2001)). “The purpose of this heightened pleading requirement was generally to eliminate abusive securities litigation and particularly to put an end to the practice of pleading ‘fraud by hindsight.’ ” Id. at 1084-85 (citing In re Silicon Graphics Sec. Litig., 183 F.3d 970, 973 (9th Cir.1999)). To meet this heightened pleading requirement, the complaint must “specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.” Id. at 1085 (citing 15 U.S.C. §§ 78u-4(b)(l)). The second requirement of the PSLRA is that the complaint must “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. (citing 15 U.S.C. §§ 78u^f(b)(2)) (emphasis added). The Ninth Circuit has interpreted the scienter pleading requirement as meaning that plaintiffs “must plead, in great detail, facts that constitute strong circumstantial evidence of deliberately reckless or conscious misconduct.” Silicon Graphics, 183 F.3d at 974. The Silicon Graphics Court further clarified that “recklessness only satisfies scienter under § 10(b) to the extent that it reflects some degree of intentional or conscious misconduct.” Id. at 977. The requisite recklessness must be an “extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers that is either known to the defendant or so obvious that the actor must have been aware of it.” Id. at 984. A plaintiff cannot proceed on pleadings averring scienter based on mere “motive and opportunity” but instead must “state specific facts indicating no less than a degree of recklessness that strongly suggests actual intent.” Id. at 979. Recently, in Tellabs v. Makor Issues & Rights, Ltd., — U.S. —, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007), the Supreme Court elaborated on the PSLRA’s “strong inference” standard for pleading scienter. Agreeing with the standard in the Ninth Circuit, the Court held that “courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss .... The inquiry, as several Courts of Appeals have recognized, is whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard.” Id. at 2509 (emphasis in original). Under the PSLRA “when determining whether plaintiffs have shown a strong inference of scienter, the court must consider all reasonable inferences to be drawn from the allegations, including inferences unfavorable to the plaintiffs.” Gompper v. VISX, Inc., 298 F.3d 893, 897 (9th Cir.2002). However, the “inference that the defendant acted with scienter need not be irrefutable, i.e., of the ‘smoking-gun’ genre, or even the ‘most plausible of competing inferences’.... [T]he inference of scienter must be more than merely ‘reasonable’ or ‘permissible’ — it must be cogent and compelling, thus strong in light of other explanations.” Tellabs, 127 S.Ct. at 2510. Thus, a “complaint will survive ... only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Id. (emphasis added). III. DISCUSSION A. Elements of Securities Fraud The Securities and Exchange Act of 1934 prohibits “(1) the ‘use or employ[ment] ... of any ... deceptive device,’ (2) ‘in connection with the purchase or sale of any security,’ and (3) ‘in contravention of Securities and Exchange Commission ‘rules and regulations.’ ” Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341, 125 S.Ct. 1627, 1630-31, 161 L.Ed.2d 577 (2005) (citing 15 U.S.C. § 78j(b)). Securities and Exchange Commission Rule 10b-5 makes it unlawful for any person, in connection with the purchase or sale of any security, to “make any untrue statement of a material fact” or to “omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(2004). “The courts have implied from these statutes and Rule a private damages action, which resembles, but is not identical to, common-law tort actions for deceit and misrepresentation.” Dura, 544 U.S. at 341, 125 S.Ct. 1627 (citing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730, 744, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 196, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)). In addition, “Congress has imposed statutory requirements on that private action.” Id. The Supreme Court has enumerated the following elements of a cause of action for securities fraud arising under section 10(b) and rule 10b-5: (1) a material misrepresentation (or omission), see Basic Inc. v. Levinson, 485 U.S. 224, 231-232, 108 S.Ct. 978, 99 L.Ed.2d 194, ... (1988); (2) scienter, i.e., a wrongful state of mind, see Ernst & Ernst, [425 U.S.] at 197, 199, 96 S.Ct. 1375 ...; (3) a connection with the purchase or sale of a security, see Blue Chip Stamps, [421 U.S.] at 730-731, 95 S.Ct. 1917 ...; (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as ‘transaction causation,’ see Basic, [485 U.S.] at 248-249, 108 S.Ct. 978 ... (nonconclu-sively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence); (5) economic loss, 15 U.S.C. § 78u-4(b)(4); and (6) ‘loss causation,’ i.e., a causal connection between the material misrepresentation and the loss, [15 U.S.C. § 78u-4(b)(4) ]; cf. T. Hazen, Law of Securities Regulation, §§ 12.11[1], [3] (5th ed.2002). Dura, 544 U.S. at 341, 125 S.Ct. 1627 (emphasis in original). Of the six elements Plaintiff must allege to state a claim for securities fraud under § 10-b, Defendants only challenge the scienter element. See Defs.’ Mem. of P. & A. in Supp. of Mot. to Dismiss First Am. Compl. 7:26-16:19 (hereinafter “Defs.’ Mot.”). Specifically, Defendants argue that Plaintiff has not pled scienter with the requisite degree of particularity required under the PSLRA476-86-2230. Id. at 8:1-3. Both the Ninth Circuit and the Supreme Court have directed that determinations regarding the sufficiency of the scienter allegations in a complaint should be not be made by scrutinizing “each allegation in isolation[,] but [by] assessing] all the allegations holistically.” Tellabs, 127 S.Ct. at 2511. Moreover, this “holistic determination” must be made by determining whether Plaintiff has “pled facts rendering an inference of scienter at least as likely as any plausible opposing inference.” Id. at 2513 (emphasis added). Thus, for purposes of this order, the Court will analyze each of the relevant facts and allegations individually, and then weigh them in their totality to determine whether the scienter requirement has been sufficiently pled. For the reasons set forth below, the Court concludes that Plaintiff has sufficiently pled scienter. It should be noted at the outset, however, that Defendants misapprehend the nature of the Tellabs decision and its effect on the PSLRA standard within the Ninth Circuit. Defendants claim in their Reply to Plaintiffs Opposition that the Tellabs’ mandate that courts take “into account plausible opposing inferences” somehow elevates the PSLRA pleading standard above the prior Ninth Circuit standard. See Defs.’ Reply in Supp. of Mot. to Dismiss First Am. Compl. at 3:24-27, 4:8-10 (hereinafter “Defs.’ Reply”). While the Supreme Court’s holding in Tellabs requiring courts to consider “plausible opposing inferences” may have raised the standard in other circuits, in Gompper1, cited in Defendant’s own Motion at 7:13-14, 12:28, and 15:12, the Ninth Circuit held that “all reasonable inferences must be drawn from the allegations, including inferences unfavorable to the plaintiffs.” Gompper, 298 F.3d at 897 (emphasis in original). Moreover, the Gompper Court held that a court “should consider all the allegations in their entirety” to determine whether “the plaintiffs’ complaint gives rise to the requisite inference of scienter.” Id. In citing to Gompper, the Tellabs’ Court held that the inquiry “is whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard.” Tellabs, 127 S.Ct. at 2509. Thus, in Tellabs the Supreme Court explicitly approved the Ninth Circuit’s Gompper standard. Given that the Ninth Circuit language is virtually identical to the language in Tellabs, and the Tellabs court cited to Gompper in relation to this holding, Defendants’ claim that Tel-labs somehow elevated the pleading standard is incorrect and ironic given that Section 11(A) of Defendants’ Reply is entitled “Plaintiff Misapprehends the Pleading Standard.” B. Backdated Stock Options The Court finds the backdated stock options and the concurrent practices of the option-granting employees are highly suspicious and concludes that both lean heavily toward a finding of scienter. Quest has admitted that “accounting measurement dates for most of the stock option grants to employees from July 1998 and May 2002 differed from the recorded grant dates.” See Compl. ¶ 166. Defendants argue that despite this admission, the backdated options are insufficient to plead scienter because the granting procedures are “highly technical,” and the backdating is the result of “the complexity of accounting for equity-based compensation.” Defs.’ Mot. at 10:25-26 n. 5; Defs.’Reply at 10:5-6. Defendants’ argument is unpersuasive. The option grants at issue are those granted on April 14, 2000, March 28, 2001, April 4, 2001, October 1, 2001, August 6, 2002, and August 7, 2002. The first date, April 14, 2000, was the lowest price for Quest stock in 2000. The March 28, 2001 stock price preceded one of the steepest rises in the trading history for Quest’s common stock, a 143.09% rise over the next month. On April 4, 2001, one week after the March 28, 2001 option grants, Quest issued additional options. April 4, 2001 was the lowest stock price per share for the first six months of that year. As with the March 28, 2001 option grants, this stock price also preceded one of the steepest rises in trading history for Quest’s common stock, a 123.16% rise over the next month. The options granted on October 1, 2001 were granted at a price that was within two trading days of the lowest stock price per share of Quest’s stock in 2001. Indeed, the issue price was a mere three cents higher than the lowest price for the year; a marginal sum given the October 1, 2001 price of $10.74 per share for Quest’s common stock. The option grants dated August 6, 2002 were within one day of the lowest price per share of Quest’s stock for the first eight months of that year. One month later, Quest’s stock price had risen 33.45%. Finally, options were also granted on August 7, 2002. One month after this date, Quest’s stock price had risen 34.94%. Plaintiff has not alleged any improper option granting dates after August 7, 2002; but instead has suggested that the lack of any additional dates from August 7, 2002 to the end of the class period (July 3, 2006) is a direct result of the option reporting provisions of SOX becoming effective at the end of August 2002. For an additional discussion of the Plaintiffs allegations regarding the ramifications of SOX, see Section 11(B), infra. At first glance, these extremely fortunate dates give rise to a strong inference that backdating has occurred and that it was done intentionally. The dates supplied in Plaintiffs FAC all appear to reflect either the lowest prices for a period exceeding six months, or are prices that immediately proceeded rapid increases in the price of Quest’s stock. The fact that none of the option grant dates resulted in less-than-favorable results for Defendants also gives rise to a strong suggestion that the improper dating of options was intentional. Moreover, to see the rather remarkable results of the “highly technical” accounting treatments, one need only look at the stock charts reproduced in Plaintiffs FAC. See PL’s First Am. Compl. 3:6-12, 4:7-14, and 5:1-8. When these stock charts reflecting Quest stock’s price history are overlaid with demarcations reflecting the date of the option grants at issue (as has been done in Plaintiffs FAC), the presence of backdating becomes abundantly clear. The graphical representation lends substantial support to the notion that no amount of “highly technical” accounting treatments can obscure the obvious that someone at Quest was engaging in substantial, prolonged, and intentional backdating of stock options. In the parlance of the Tellabs holding, the Court can definitively state that the inference that intentional backdating occurred at Quest is more “cogent and compelling” than any opposing inference offered by Defendant. Thus, in accordance with Ninth Circuit precedent, the question then becomes whether Plaintiff has adequately pled that Defendants’ either knew of the backdating, or were deliberately reckless in not knowing of the backdating. C. Defendants’ Knowledge of Backdated Options The Court finds that Defendants either knew or were deliberately reckless in not knowing that the purported option grant dates were improper. Given the extremely beneficial option grant dates, the Individual Defendants’ respective executive positions in the Company, and the substantial number of shares awarded to the various Defendants during and before the Class Period, the Court finds that Plaintiff has sufficiently pled a “strong inference” that Defendants knew or were deliberately reckless in not knowing that the purported option grant dates were improper. See Gompper, 298 F.3d at 897. Nevertheless, as the Court is required to consider all inferences, not just those that are beneficial to Plaintiff, the Court will now turn to Defendants’ arguments. See id. Defendants have argued in their moving papers that the method of accounting for options is “highly technical.” Defs.’ Mot. 10:23-28 n. 5. Moreover, Defendants argue that Plaintiff has failed to allege that each Defendant knew that the accounting measurement date for any option grant differed from the grant date. In support of this argument, Defendants assert that the Individual Defendants “would have to know that the process or methodologies that the Company used produced different accounting measurement and grant dates.” Id. Here the Individual Defendants reaped substantial rewards as a result of the backdating, and thus they knew how favorable the option grant dates were, such that they didn’t need to understand the process and methodology to know that the dates were improper. Under these circumstances, the Court finds it highly improbable that a failure to comprehend the proper accounting treatment of stock options would so consistently benefit Defendants. Regardless of whether the accounting is “highly technical,” it can not cause option grant dates to mysteriously fall on some of the lowest priced dates of 2000, 2001, and 2002 without someone’s influence. Indeed, were such determinations as complex as Defendants argue, it would be expected that the option measurement dates would occasionally be detrimental to Defendants. When the absence of detrimental measurement dates is combined with the fact that Defendants were some of the primary beneficiaries of the backdated options, and also held key positions to control the measurement dates, the conclusion is that Defendants likely influenced the grant dates, and thus, likely knew of the improper backdating. Although “likely knew” is insufficient for purposes of the PSLRA, actual knowledge is not the only mental state that satisfies the PSLRA. A strong showing of scienter can also be adequately pled if the complaint pleads “deliberate recklessness” in lieu of actual knowledge. Silicon Graphics, 183 F.3d at 974. Collectively, Defendants were the recipients of literally millions of option grants between 1998 and 2002. This fact, standing in isolation, is insufficient to establish “deliberate recklessness.” However, Plaintiffs FAC specifies the precise number of options received by Defendants on the respective improper grant dates. See Pl.’s First Am. Compl. ¶¶ 91-97. Indeed, it is simply incomprehensible that for such large option grants Defendants would not have been keenly aware of the option measurement date and the resulting value of the option grants. Given that Defendants’ respective positions on the Compensation Committee, Audit Committee, as CFOs, etc., would have given Defendants detailed knowledge of when the options were actually granted, and given that the Court has already found (in no small part because of the press release issued by Quest itself) that extensive backdating occurred, Plaintiffs FAC has adequately pled that Defendants would have known or were deliberately reckless in not knowing about the backdated options. Thus, Plaintiff has pled a strong inference of scienter. Although this inference of scienter is compelling, to survive at this stage the inference must be “at least as compelling as any opposing inference one could draw from the facts alleged.” Tel-labs, 127 S.Ct. at 2510. Defendants argue that even if they were aware of the improper measurement dates of the options, this is not sufficient to demonstrate deliberate recklessness, as the Individual Defendants were not aware of the proper accounting treatments for option measurement dates. However, as previously stated, the Court finds that the measurement dates for determining when an option was effectively granted are not so complex as to cause confusion on the part of sophisticated public company executives. To be clear, the Court is not relying on a de facto rule that scienter is sufficiently pled if the option grants were given to those at the executive level within the company; nor is the Court relying on a defacto rule that option measurement date calculations are not inherently complex. Rather, the Court finds that the substantial number and value of the option grants given to Defendants that consistently had measurement dates on either the lowest prices of the year or immediately proceeding rapid rises in the Company’s stock, combined with Defendant’s key positions relating to both the granting of and/or accounting for stock options gives rise to a compelling inference of either Defendants’ actual knowledge or deliberate recklessness. Plaintiffs allegations regarding Defendants’ knowledge is further supported by the interplay between the effective date of the Sarbanes-Oxley Act and the timing of Defendants’ use of improper measurement dates. Plaintiff has alleged that the last options to be backdated were those options for which the measurement date was changed to August 6 and 7, 2002. The reason, according to Plaintiff is the effective date of SOX. After August 30, 2002, the effective date of Sarbanes-Oxley § 403, stock option grants were required to be reported within two business days. Plaintiff alleges that § 403 meant that Defendants could no longer engage in the practice of looking back over the course of the fiscal year to choose the most beneficial dates as option measurement dates. See PL’s First Am. Compl. ¶ 196. Defendant counters that an innocent explanation exists: Quest’s option granting procedures did, in fact, involve a certain degree of hindsight, and the passage of SOX effectively prohibited these procedures. In light of the remarkably fortuitous option grant dates Plaintiff describes (see id. at 2:20-5:9 and 25:25-27:13), Defendants argument is highly implausible. As Defendant’s argument is neither as cogent nor as compelling as Plaintiffs pleadings, the Court finds that Plaintiff has adequately pled that Defendants either had knowledge of or were deliberately reckless in the determination of stock option measurement dates. D. Defendants’ Stock Sales The next issue is whether Defendants’ stock sales can be considered “suspicious” to support a finding of scienter. Plaintiff has alleged that five of the seven individual Defendants (Smith, Brooks, Garn, Doyle, and Murdock) have sold, in total, at least 2,744,737 shares of Quest common stock during the Class Period for proceeds totaling approximately $38,547,581.72. Pl.’s First Am. Compl. ¶ 191. At a glance, the rather substantial number of shares sold and the resulting proceeds suggest a possible motive for the backdating such that the stock sales support an inference of scienter. However, as Defendants have correctly noted, these facts alone, without qualification or explanation, are insufficient under Ninth Circuit precedent. “[IJnsider trading is suspicious only when it is ‘dramatically out of line with prior trading practices at times calculated to maximize the personal benefit from undisclosed inside information.’ ” Ronconi v. Larkin, 253 F.3d 423, 435 (9th Cir.2001) (quoting In re Silicon Graphics, 183 F.3d at 986 (quoting In re Apple Computer Sec. Litig., 886 F.2d 1109, 1117 (9th Cir.1989)). To make this determination, Courts must consider three relevant factors: “(1) the amount and percentage of shares sold by insiders; (2) the timing of the sales; and (3) whether the sales were consistent with the insider’s prior trading history.” Ronconi v. Larkin, 253 F.3d 423, 435 (9th Cir.2001). i. Amount and Percentage of Shares Sold By Insiders Plaintiff has pled with particularity the amount of shares sold by the respective Defendants, but not the percentage. See Pl.’s First Am. Compl. pp. 52-61. Plaintiff has listed the precise number of shares sold, the dates on which the shares were sold, the price for which the shares were sold, and the resulting earnings by each Defendant. Id. Plaintiff has not, however, alleged what percentage of each Defendant’s shares were sold. Typically, courts consider the percentage of shares sold to determine whether insiders are taking advantage of insider knowledge regarding a scheme that will artificially