Nasdaq Settles For $26.5 Million with Retail Investors Over Facebook IPO

On the heels of a lingering investigation and class action lawsuit over technical glitches that plagued the fabled Facebook IPO back in 2012, Nasdaq has agreed to a $26.5 million settlement, according to a Reuters report.

The run of the Facebook offering was one of the more chronicled and hyped IPOs in recent memory, which vastly exceeded its initial pricing for investors at the inaugural opening, only to wither shortly after.

As a result of copious technical glitches however, Nasdaq found itself being sued by retail investors who alleged that the Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term was covering up flaws in its technology, failing to adequately test its systems ahead of the social media group's market debut.

More specifically, the May 18, 2012 IPO was riddled with technical glitches - including a malfunction in the system's design for processing order cancellations - that left a number of Market Makers Market Makers Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Read this Term unsure whether trades were processed.

In total, the technical malfunctions incurred by market makers was estimated at $500 million. Later that year, Nasdaq agreed to a $62 million package in restitution. However, the deal failed to address claims of ordinary retail investors.

According to Vincent Cappucci, one of the lawyers representing retail investors damaged in the IPO, in a statement on the suit, "This is the first case that we are aware of where a class of investors has sued an exchange for market disruption, and the court has sustained those claims.”