After Facebook Debacle, SEC May Pull IPO Gag

Committee tells Darrell Issa he raised valid points
By Kevin Spak,  Newser Staff
Posted Aug 27, 2012 10:56 AM CDT
After Facebook Debacle, SEC May Pull IPO Gag
In this Monday May 21, 2012, file photo, television correspondent Sabrina Quagliozzi reports from inside the Nasdaq MarketSite in New York's Times Square.   (AP Photo/Richard Drew)

The SEC is considering eliminating the rule forbidding company executives from hyping their stock before they go public, after a string of disastrous high-profile IPOs like Facebook's. SEC chair Mary Schapiro sent a letter to Darrell Issa letting him know that her team was reviewing the so-called "quiet period" rule, after complaints that it had left small investors in the dark, the Wall Street Journal reports.

Issa was a vocal critic of the Facebook IPO, saying it revealed "substantial flaws" in the process. He's advocated a number of reforms, including lifting the gag order, instituting safe harbors for pre-IPO statements, and even setting initial prices via public auction. Facebook's IPO drew eyebrows because underwriter Morgan Stanley analyzed the deal and warned select clients to stay away, warnings the general investing public didn’t get. Schapiro's letter admitted that the underwriter's role in a deal does "raise potential conflict of interest." (More SEC stories.)

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