Nasdaq Charged for Failures during Facebook IPO

The SEC charged NASDAQ with securities laws violations resulting from the Facebook IPO.

In settling these charges, NASDAQ agreed to pay a $10 million penalty and to certain undertakings, including enhancements to its technology change process and an expansion and formalization of the role of the NASDAQ's Regulatory Group in the technology change process. The order also resolves charges stemming from unrelated violations by NASDAQ of Regulation SHO and Regulation NMS.

While the SEC's charges relating to the Facebook IPO were based upon NASDAQ's failure to comply with several of its own rules, the SEC's press release specifically noted the presence of "poorly designed systems and hasty decision-making . . . [that] produced serious and pervasive violations of fundamental rules governing [the equity] markets. . . ."

This case points to the increasing regulatory risk presented by technology - not only for exchanges, but for all registrants.

See: Order; Press Release.