Congressional committees looking into Facebook IPO problems - Los Angeles Times
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Congressional committees looking into Facebook IPO problems

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<i>This post has been corrected, as indicated below.</i>

WASHINGTON -- Two congressional committees are looking into the troubled initial public offering of Facebook Inc., aides said Wednesday.

The Senate Banking Committee and House Financial Services Committee are both conducting preliminary inquiries, though neither has started a formal investigation or set hearings to specifically address concerns raised about the IPO, the aides said.

“Effective capital markets require transparency and accountability, not one set of rules for insiders and another for the rest of us,” said Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking subcommittee on financial institutions and consumer protection.

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Brown said the Securities and Exchange Commission “must fully investigate and take appropriate action if it discovers any violations.”

SEC Chairwoman Mary Schapiro said Tuesday that there were issues related to the Facebook IPO that the agency needed to look in to.

Her comments came amid reports that Morgan Stanley & Co., the lead underwriter of one of the most eagerly anticipated IPOs ever, had informed some favored clients before Friday’s offering that the bank was cutting its revenue estimates for Facebook.

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The Senate Banking Committee wants to learn more about issues raised in news reports about Facebook’s IPO and staff are receiving briefings from Facebook, regulators and other stakeholders, said a committee aide, who was not authorized to speak publicly.

Staff at the House Financial Services Committee also are gathering information about Facebook’s IPO, said Marisol Garibay, the committee’s communications director.

“While no hearings specifically focused on this IPO are planned at this time, the committee will have hearings over the coming weeks where this topic is likely to be raised,” she said.

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Brown said the problems in Facebook’s IPO highlighted his concerns about the recently enacted Jump-Start Our Business Start-Ups Act, known as the JOBS Act.

The law, which had strong bipartisan support and was signed by President Obama in April, was designed to make it easier for small businesses to get access to investment capital. But opponents warned that the JOBS Act would weaken regulatory oversight of stock offerings.

Facebook’s IPO was not affected because the law only applies to smaller companies and the SEC still must draft regulations to implement the law.

“The conduct in this highly publicized IPO only reinforces that the Senate was mistaken in voting to remove oversight from approximately 98% of all IPOs for companies making less than $1 billion per year,” Brown said.

For the record, 1:27 p.m. May 23: An earlier version of the post referred to the JOBS Act as legislation. It was signed into law in April. The post also did not make clear that the law has not yet been implemented and that it would not have affected Facebook’s IPO.

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