Facebook Inc (NASDAQ:FB) celebrated its one-year anniversary as a publicly traded company back in May, but legal and bureaucratic ripples have continued to be felt since that day of the initial public offering, which could not have gone worse unless NASDAQ shut down that day due to a short in the electrical grid.
Sure enough, several class-action lawsuits were filed as a result of the Facebook Inc (NASDAQ:FB) IPO, with some directly suing the NASDAQ exchange for negligence in performing its duties to executing the IPO, to suing Facebook directly for providing certain key information to a selected number of investors instead of the entire group of investors. This week there was a development in the case directly against NASDAQ that claimed the exchange was negligent in its performance of the IPO.
In a motion filed with the court, NASDAQ is essentially trying to thumb its nose at the classes in the Facebook Inc (NASDAQ:FB) IPO case by claiming that it cannot be sued by the classes because NASDAQ is classified as a “self-regulatory organization” that was performing is normal “regulatory functions,” as quoted in the brief filed with U.S. District Judge Robert Sweet. The brief went on to say that the plaintiffs in the case had not yet supplied material evidence supporting claims of negligence or breaking any securities laws in the organization’s handling of the IPO.
However, NASDAQ did reach a $10 million settlement with the Securities an Exchange Commission over alleged securities-law violations, though as part of the settlement NASDAQ did not admit wrongdoing. Facebook Inc (NASDAQ:FB) has also seen several banks which were underwriters for the IPO all petition the court to be waived from the litigation as they claim to not be involved in the chaos that took place on the first day of Facebook trading.
What did the brief say, actually? How does NASDAQ claim to be immune from such a lawsuit?
In the brief NASDAQ lawyers wrote, “SRO (self-regulatory organization) immunity protects Nasdaq from liability for claims relating to its allegedly negligent handling of the commencement of trading in Facebook stock and alleged misrepresentations because all of those claims arise out of Nasdaq’s regulatory functions.”
The judge has not yet ruled on the motion to dismiss, and there is no indication yet as to when that will happen. What are your thoughts? Should the self-regulated be made to account for its regulation? Or does this claim of legal immunity fit in this case? How might this affect Facebook Inc (NASDAQ:FB) and those investors not in on the lawsuit, like fund manager Steven Cohen (see his full equity portfolio)? Give us your thoughts in the comments section below.
DISCLOSURE: None
