The practice of paying executives with share-based compensation shortly before announcing good news that boosts the value of those payouts is coming under scrutiny from the U.S. Securities and Exchange Commission (SEC).

The regulator issued guidance on properly recognizing and disclosing the cost of so-called spring-loaded compensation — when companies pay executives with options or other share-based awards ahead of the release of positive market-moving news, such as better-than-expected earnings or a major transaction.

The SEC said its staff believes that companies must consider the impact of the good news on executive pay in assessing and reporting the compensation actually paid to executives.

“Companies should not grant spring-loaded awards under any mistaken belief that they do not have to reflect any of the additional value conveyed to the recipients from the anticipated announcement of material information when recognizing compensation cost for the awards,” the regulator said in a release.

The guidance indicated that these sorts of payouts should come under close scrutiny from those responsible for compensation and financial reporting governance.

“It is important that companies’ accounting and disclosures reflect the economics and terms of these compensation arrangements,” said SEC chairman, Gary Gensler. “This gets to the SEC’s remit to protect investors.”