SEC Scrutiny Ratchets Up the Pressure on Nasdaq

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Two weeks ago, the U.S. Securities and Exchange Commission (SEC) announced that it is looking into the technical glitches that plagued Facebook’s IPO on the Nasdaq Stock Exchange in May. Depending on what they find, regulators may force Nasdaq OMX Group Inc. to upgrade its systems before another instance of high-volume trading creates more problems for investors seeking to capitalize on enticing opportunities that are all-too-rare in the current economic environment.

SEC scrutiny isn’t the only problem confronting Nasdaq in the wake of the debacle that befell its largest IPO to date. Brokers are lined up for restitution from losses suffered when trades failed to process and clients of the 41-year-old exchange are now openly questioning whether or not the exchange is still as much of an industry leaders as its reputation portends. Worst of all, many potential listee companies are just as concerned as the SEC and wondering if the glitches will resurface with future IPOs. And let’s not forget that Nasdaq’s chief rival, the New York Stock Exchange (NYSE), has already successfully courted tech start-up clients including LinkedIn, Pandora, and Yelp.

Nasdaq’s decision to bring in IBM to review current technologies and practices represents a positive first step in regaining trust in the marketplace; but internal efforts will do little to rebuild confidence without an effective public awareness campaign that emphasizes recognition of the underlying problems and a steadfast commitment to solving them.

With Facebook announcing earnings on July 26, and having stated that it will remain with the exchange for now, the situation bears watching. The situation is fluid – and companies have much less tolerance for unforced errors today.

If Facebook defects, it may not be long before other tech start-ups start defriending Nasdaq and hitting the “Like” button for the NYSE.

Michael W. Robinson is an Executive Vice President at Levick Strategic Communications and a contributing author to Bulletproof Blog®.

 

Published In: Administrative Agency Updates, Finance & Banking Updates, Science, Computers & Technology Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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