The Securities and Exchange Commission (SEC) fined the Nasdaq stock market $10 million on Wednesday over charges that it bungled Facebook's initial public stock offering last year.
According to the SEC, Nasdaq moved forward with the IPO despite knowing it had a software glitch, which ended up allowing 30,000 share orders to pile up unfilled. The error potentially cost investors many millions.
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"This action against Nasdaq tells the tale of how poorly designed systems and hasty decision-making not only disrupted one of the largest IPOs in history, but produced serious and pervasive violations of fundamental rules governing our markets," said George S. Canellos, co-director of the SEC's Division of Enforcement.
Nasdaq's senior leadership team held a "Code Blue" conference call and decided not to delay starting the secondary market trading in Facebook, as it expected system limitations had already been fixed by removing a few lines of computer code. The SEC said, however, that they did not understand the root cause of the problem and that their decision to start trading before fully understanding the problem led to violations of several rules, including Nasdaq's fundamental rule that "governs the price and time priority for executing trade orders."