| NEW YORK
NEW YORK Dec 16 A federal judge has rejected
Nasdaq OMX Group Inc's bid to dismiss lawsuits by
investors who accused the exchange operator of botching Facebook
Inc's $16 billion initial public offering, a decision
released on Monday shows.
Nasdaq had argued that its status as a self-regulatory
organization (SRO) gave it immunity from claims it broke
securities laws and was negligent in how it executed orders to
buy and sell shares of the social media company on May 18, 2012,
the first day of trading.
In a 97-page decision, U.S. District Judge Robert Sweet in
Manhattan agreed that SRO status gave Nasdaq immunity from some
claims, including the decision not to halt the IPO.
But he rejected Nasdaq's effort to dismiss claims over the
design and testing of its systems, including that it allegedly
knew its advertised "on-time, on-target and ready-to-launch"
had not undergone the "stress tests" needed to ensure it was up
to handling trading in Facebook.
Sweet said the plaintiffs adequately alleged that Nasdaq's
inadequate disclosures caused them to lose money through failed
trade executions and possible "artificial downward pressure" on
Facebook's share price.
"Once this testing revealed inadequacies and flaws in light
of the upcoming largest IPO in Nasdaq history, Nasdaq had a duty
to correct its prior statements as to its capabilities," the
judge wrote. "Nasdaq's failure to correct flawed information
about its technology capabilities could have impacted
plaintiffs' decision to participate in Facebook's offering and
ability to trade during that offering."
Joseph Christinat, a Nasdaq spokesman, declined to comment
on the decision, which is dated Dec. 12.
Vincent Cappucci, a lawyer for some of the plaintiffs, said
in an email he is pleased that the case can go forward.
The judge did not rule on the merits of the plaintiffs'
surviving claims. He said the plaintiffs might amend their
lawsuit with respect to claims not protected by SRO immunity.
Facebook, based in Menlo Park, California, went public at
$38 per share. Its share price rose as high as $45 on the first
day, but quickly fell below the offering price and remained
there for more than a year.
In May, Nasdaq agreed to pay $10 million, a record penalty
against a stock exchange, to settle U.S. Securities & Exchange
Commission charges over its alleged "poor systems and
decision-making" when handling Facbeook's IPO.
Nasdaq did not admit wrongdoing in agreeing to settle.
The investor lawsuit against Nasdaq is part of nationwide
Facebook IPO litigation that Sweet oversees.
Investors also sued Facebook, Chief Executive Mark
Zuckerberg and dozens of banks for allegedly being misled prior
to the IPO about the company's financial condition.
Facebook has since become profitable, and is expected to
join the Standard & Poor's 500 index after the close of
trading on Dec. 20.
In Monday trading, Facebook shares closed up 49 cents at
$53.81, and Nasdaq shares rose 17 cents to $38.72.
The case is In re Facebook Inc IPO Securities and Derivative
Litigation, U.S. District Court, Southern District of New York,