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Nasdaq faces £3.14 million penalty for Facebook IPO

Nasdaq faces £3.14 million penalty for Facebook IPO

Stock exchange group begins talks with Securities and Exchange Commission (SEC) over fine

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Nasdaq could face a fine of $5 million (£3.14 million) after talks conclude with regulators over its handling of Facebook’s high profile initial public offering (IPO).

According to sources cited by the Wall Street Journal, the stock exchange group has opened discussions with the Securities and Exchange Commission (SEC) to agree a financial penalty for its role in the disruption to trading during the social network company’s IPO.  

The IPO faced major disruptions when trading was delayed for 30 minutes due to glitches in Nasdaq's pre-auction process software.   Traders were unaware of whether orders had been placed, affecting an estimated 30 million shares’ worth of trading.

Although not yet agreed, the fine is expected to amount to one percent of the total $500 million (£314 milion) cost said to have been incurred by traders and investment banks.

Aside from settling on a penalty payment, the scope of preliminary discussions with the SEC will cover Nasdaq's apparent lack of control over its systems during the high profile IPO, as well as looking at plans to prevent similar problems occurring in future.

Nasdaq has also agreed to pay compensation to the some of the companies involved, offering to provide $62 million (£39.6 million) to cover losses.

Investment banks such as Citigroup and UBS attacked Nasdaq over losses incurred as a result of technical problems during the IPO, calling for the stock exchange group to increase its initial offer of compensation.

The SEC recently announced that it would delay its decision on the proposed compensation payment plan, with a ruling expected to be made by the end of March this year. SEC has also warned in the past that it could force Nasdaq to upgrade its systems as a result of the glitches during the IPO for the social networking site.

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