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Nasdaq Agrees To $10M Penalty For Handling Of Facebook IPO

Filed by KOSU News in Business.
May 29, 2013

One year after Facebook’s troubled initial public offering, the Securities and Exchange Commission announced Wednesday that it has “charged Nasdaq with securities laws violations resulting from its poor systems and decision-making … [and that] Nasdaq has agreed to settle the SEC’s charges by paying a $10 million penalty.”

According to the SEC, that is the largest such penalty ever paid by one of the stock exchanges.

The agency says that:

“Despite widespread anticipation that the Facebook IPO would be among the largest in history with huge numbers of investors participating, a design limitation in Nasdaq’s system to match IPO buy and sell orders caused disruptions to the Facebook IPO. NASDAQ then made a series of ill-fated decisions that led to the rules violations.”

As CNBC reminds its readers:

“Facebook’s debut last May, one of the most talked-about IPOs in recent history, was marred by technical problems.

“First, Facebook shares started trading a half-hour late. Then, some traders began complaining that it didn’t seem like their orders were being completed. Others found that they were getting shares at a higher price than they expected.”

The Wall Street Journal (paywall protected) adds that:

“The move follows months of back-and-forth between the exchange operator and the Securities and Exchange Commission over the problems that plagued Facebook’s public offering. Nasdaq executives had been angling for a settlement closer to $5 million, people involved in the discussions said last month. But executives showed a willingness to pay up to move on, these people said last month.

“An end to the Facebook investigation would bolster Nasdaq’s efforts to put the May 2012 episode behind it. Earlier this year, it gained long-awaited SEC approval for its plan to pay out $62 million to compensate customers for Facebook-related losses.”

Around 1 p.m. ET on Wednesday, Facebook’s stock was trading at just over $23.50. On May 18, 2012 — the day the company went public — shares ended at $38. [Copyright 2013 NPR]

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