Nasdaq Asks Judge to Dismiss Suit Over Facebook IPO Role

Nasdaq OMX Group Inc. asked a judge to throw out lawsuits against it by investors and traders over its role in Facebook Inc.’s May 2012 initial public offering.

Nasdaq asked U.S. District Judge Robert Sweet in Manhattan to dismiss a group of consolidated class actions claiming it violated securities laws and mishandled the first day of public trading in Facebook, the world’s biggest social network. Nasdaq claimed its legal status as a self-regulatory organization, or SRO, shields it from being sued for actions taken as part of its regulatory responsibilities.

“SRO 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 exchange said in a court filing yesterday.

Nasdaq also argued that the plaintiffs failed to state a sufficient legal claim that it was negligent or that it violated securities laws.

The plaintiffs suing Nasdaq seek to hold it responsible for technical and other trading-related errors that created market uncertainty and caused losses to traders and investors following the start of trading.

SEC Settlement

In May, Nasdaq agreed to pay $10 million to settle claims by the U.S. Securities and Exchange Commission that it broke securities laws in its handling of the Facebook IPO. The SEC cited Nasdaq for “poor systems and decision-making.” In the settlement, Nasdaq neither admitted nor denied fault.

Also in May, Facebook and a group of banks that underwrote the Menlo Park, California-based company’s IPO, including Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM), asked Sweet to dismiss claims against them growing out of the stock offering.

Vincent Cappucci, a lawyer for the plaintiffs suing Nasdaq, didn’t immediately return a voice-mail message yesterday after regular business hours seeking comment on the motion to dismiss the case.

Facebook fell 1.6 percent to $24.41 in Nasdaq Stock Market trading yesterday in New York. The shares have fallen 36 percent from the $38 IPO price.

The case is In Re Facebook Inc. (FB) IPO Securities and Derivative Litigation, 12-md-02389, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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