SEC Fines Nasdaq $10 Million for Botched Facebook IPO

by Adam Benjamin | May 29, 2013 4:47 pm

Remember how the Facebook (FB[1]) IPO was one of the worst IPOs in recent memory[2]? Well, it might not have been entirely Zuckerberg’s fault.

In the largest fine the commission has ever levied, the SEC is fining the Nasdaq $10 million for violating securities laws. According to CNBC[3], the SEC stated:

Exchanges have an obligation to ensure that their systems, processes and contingency planning are robust and adequate to manage an IPO without disruption to the market. [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.

The Nasdaq is also charged with breaking multiple rules of its own, including assuming short positions in Facebook and then covering those positions. The Nasdaq paid the fine without admitting or denying guilt, and without offering apology. (However, Nasdaq’s CEO did apologize shortly after the IPO.)

Shares of Facebook dropped another 3% on the day.

Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  2. worst IPOs in recent memory: http://investorplace.com/ipo-playbook/did-facebook-kill-the-blockbuster-ipo/
  3. According to CNBC: http://www.cnbc.com/id/100736915

Source URL: http://investorplace.com/2013/05/sec-fines-nasdaq-10-million-for-botched-facebook-ipo/
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