Nasdaq OMX Group Inc. agreed to pay $10 million to settle Securities and Exchange Commission charges that its mishandling of Facebook Inc.’s initial public offering last year was a violation of securities laws.
Regulators cited the second-largest operator of U.S. equity markets for its “poor systems and decision-making” during the IPO in May 2012 that was delayed by a computer malfunction. The settlement is the largest with an American exchange, which enjoy legal protections because of their self-regulating role.
Brokers handling Facebook orders in the May 2012 IPO claimed they lost hundreds of millions of dollars after a design flaw in Nasdaq’s software delayed the stock’s open and left them confused about whether or not they owned shares. Yesterday’s settlement is in addition to Nasdaq’s proposal to pay $62 million to compensate member firms for losses.
The SEC penalty was imposed because Nasdaq failed in its obligation to ensure that systems, processes and contingency planning are robust and adequate to manage an IPO without disruption to the market, the agency said.
“The settlement is another important step forward,” said Nasdaq Chief Executive Officer Robert Greifeld in an open letter e-mailed to Bloomberg News. “We have put in place innovative safeguards and taken a number of steps to help ensure that Nasdaq continues to deliver the world’s best trading technology.”
Greifeld said in the letter that Nasdaq has made staff and operational changes to improve compliance.