February 06, 2013

Nasdaq May Pay $5M Fine for Troubled Facebook IPO


Nasdaq OMX Group may pay a $5-million fine for last year’s problem-plagued Facebook IPO.

The amount is far less than the approximately $500-million loss seen by four brokerage firms that resulted from the May 18 initial public offering.

The Wall Street Journal reports that the stock exchange is in preliminary talks with the Securities and Exchange Commission (SEC) over a potential settlement.

It would represent only the second time that the SEC has fined a stock exchange. Last year, the New York Stock Exchange paid a $5-million fine.

In addition, Nasdaq may give customers $62 million to compensate for the losses related to the IPO. That proposed amount still needs to get approval from the SEC.

Among the problems with the IPO was the half-hour delay in the opening of trading for Facebook shares. There were also some three hours in delays for order confirmations being sent out to brokers. There was a lot of confusion among both investors and brokers that day as well.

Some orders apparently were just plain lost, according to TechZone360.

It appears the SEC remains concerned that current computer-based trading needs to be better controlled. Nasdaq was investigated for eight months about the circumstances surrounding the IPO, and many industry watchers want to see them held responsible.

"Why should the banks and brokers be left holding the bag for Nasdaq's snafus?" Scott Saks, a lawyer at Paul Hastings, asked in a statement made to The Journal.

The exchange is cooperating with regulators. “We’re working closely with the SEC to resolve the issues that arose from the events on May 18,” Joseph Christinat, a spokesman for Nasdaq OMX, said in a statement carried by Bloomberg Businessweek. “We continue to believe we acted appropriately and in the best interest of investors under challenging circumstances and we have volunteered an accommodation plan supported by many members.”

However, New York Stock Exchange CEO Duncan Niederauer claimed last year that market confidence was hurt by the Facebook IPO. Many concerns were also raised by members of Congress over the botched IPO.




Edited by Braden Becker



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