Bats Said Poised to Escape SEC Fine for Botched March 2012 IPOSam Mamudi and Joshua Gallu
U.S. regulators will recommend against fining Bats Global Markets Inc. for a computer error that prevented the exchange owner from completing its March 2012 initial public offering, according to three people familiar with the matter.
Securities and Exchange Commission staff are preparing a report on their findings that doesn’t include a cash penalty, according to the people, who asked not to be identified because the document hasn’t been voted on by the SEC’s five commissioners. The report will probably be published next month, the people said.
The stock exchange’s software malfunctioned after investment bankers completed their role in IPO, preventing Bats shares from trading and prompting a brief nationwide halt in Apple Inc. transactions. Bats Chief Executive Officer Joe Ratterman canceled the IPO and last year agreed to merge with another market operator, Direct Edge Holdings LLC.
The SEC usually publishes reports like the one on Bats when it wants to send a message to the industry about conduct it deems problematic, even if there’s no violation of securities laws. Investigators are using them more after George Canellos, the former co-chief of SEC enforcement, said in February that they are a “vital” tool for shaping industry conduct. The SEC filed three 21a reports last year after having filed only 10 since 1996, according to the agency’s website.
After the Bats malfunction, the SEC proposed Regulation Systems Compliance and Integrity, or Reg SCI, which would impose tougher testing regimes for exchanges if approved.
John Nester, an SEC spokesman, declined to comment, as did Randy Williams of Bats.
Bats runs stock markets that compete with the New York Stock Exchange, Nasdaq Stock Market and more than 50 other venues where U.S. shares trade.