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Nasdaq says FINRA caps Facebook IPO claims at $41.6 million

Last Updated: Saturday, October 26, 2013 - 10:38

Washington: The total value of the claims that market makers can recover after suffering losses due to Nasdaq OMX Group Inc`s botched handling of Facebook Inc`s initial public offering is USD 41.6 million, the exchange operator said Friday.

The claims figure, which was calculated by Wall Street`s industry-funded watchdog the Financial Industry Regulatory Authority, falls short of the USD 62 million that Nasdaq had initially set aside to repay brokerages that lost money.

Nasdaq said the figure is lower in part because some claims did not qualify for compensation under its plan.

The main reason for the lower figure, however, was because one firm opted to try to recover funds through arbitration.

The announcement did not name the brokerage, which was UBS AG .

UBS has pegged its losses from the glitch-ridden IPO at USD 350 million and was vocal in its decision to file an arbitration demand which claimed Nasdaq had violated a contract agreement.

U.S. District Judge Robert Sweet, however, blocked the bank`s arbitration proceeding over the summer on several grounds, including a determination that the bank`s claims did not fall within the scope of the arbitration provision in their services agreement.

Facebook`s problematic debut on the Nasdaq exchange on May 18, 2012, resulted from a systems failure that prevented the timely delivery of order confirmations and left more than 30,000 Facebook orders stuck in Nasdaq`s system for more than two hours.

Many brokerages were left in the dark wondering if their trades went through. Major market makers estimated they lost collectively up to USD 500 million in the IPO.

Nasdaq devised a plan to compensate firms up to USD 62 million, and laid out the criteria for how firms can be eligible to file claims.

The U.S. Securities and Exchange Commission approved the compensation plan in March, and FINRA was put in charge of processing the claims for restitution.

Several months after approving the plan, the SEC in May filed civil charges against Nasdaq, saying the exchange`s "ill-fated decisions" on the day of the Facebook IPO led to a series of regulatory violations.

Nasdaq settled the charges and agreed to pay a USD 10 million fine.

First Published: Saturday, October 26, 2013 - 10:37
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