Citi, UBS Rebut Nasdaq FB Proposal - Analyst Blog


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Causing a major setback to Nasdaq OMX Group Inc. ( NDAQ ), Citigroup Inc . ( C ) and UBS AG ( UBS ) slammed its compensation plan for firms, who suffered losses worth millions during Facebook Inc. 's ( FB ) muddled initial public offering (IPO), according to media sources.

Nasdaq offered to pay $62 million for the glitches in the Facebook IPO and asked the firms who would receive the compensation to forgo their right to chase the exchange for the losses they suffered. This has been criticized severely by Citi and UBS AG.

Letters have been sent to the Securities and Exchange Commission by Citi and UBS and some others, who slammed the compensation plan and charged Nasdaq on several grounds.

UBS has rebutted Nasdaq's compensation plan, claiming that it is insufficient compared to the huge losses that have resulted from the exceptional failure on Nasdaq's behalf. UBS estimates its loss from the Facebook IPO to be at $356 million.

It blamed Nasdaq for the severe stress on its retail marketing system. Also, UBS demanded an expansion of the types of claims for losses on trading eligible for compensation. Moreover, Nasdaq's proposal that the beneficiaries of the compensation plan need to take back or refrain from other legitimate claims against Nasdaq, is also being cited as unfair by UBS.

On the other hand, Citi also challenged Nasdaq's compensation plan. It blamed Nasdaq for gross negligence and said that the compensation offered would only cover a small part of its total losses. Notably, Citi is said to have lost $20 million for the botched up Facebook IPO.

Nasdaq has also been criticized by Citi, owing to its immunity against liabilities as it holds the position of both an exchange as well as a regulatory body. Citi claimed that Nasdaq should not enjoy the immunity for its regulatory status in this case because of its negligence, which resulted in losses worth millions by the market participants in the Facebook IPO, occurred when it was operating for profit and not for regulatory motives.

While Citi and UBS as well as some others have criticized Nasdaq's compensation plan, Citadel has voted in favor of the proposal and asked SEC for its approval.

In Conclusion

We believe that the wrongdoers should be adequately penalized and the sufferers should receive due compensation. If Citi, UBS and others who stand against Nasdaq's proposed compensation plan can defend their case before authorities, then it can help recover their losses. In fact, an apt judgment in this case should be meted out in order to avoid similar incidences in the future.

CITIGROUP INC (C): Free Stock Analysis Report
FACEBOOK INC-A (FB): Free Stock Analysis Report
NASDAQ OMX GRP (NDAQ): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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