Will Facebook Force SEC to Rethink IPO Rules?

After Facebook’s (NASDAQ:FB) problematic public debut in May, the Securities and Exchange Commission is reportedly rethinking pre-IPO quiet-period rules.

Don’t Miss: Did Facebook Get GOOD NEWS?

SEC Chairwoman Mary Schapiro says in a letter to Representative Darrel Issa (R-Calif.) that her staff is reviewing rules about what information companies can release prior to their offerings, according to Reuters, which obtained a copy of the letter.

The SEC currently limits the information a company can release from the time it files an IPO registration statement to the time it makes its IPO.

The review follows on the heels of Facebook’s botched offering, which prompted more than a dozen shareholder lawsuits accusing the company and its underwriters of obscuring its weakened growth forecasts ahead of the listing.

In a second letter obtained by Reuters, Issa says Facebook’s quiet period left some investors with an “informational disadvantage” that “proved harmful.” Issa chairs the House Oversight and Government Reform Committee.

Facebook’s offering in May was followed shortly by allegations that its underwriters’ research analysts passed on new earnings estimates to top investor clients, while other investors were not privy to that information.

Banks involved in the IPO claim they followed standard procedure during communication with investors and were in compliance with the law, which if true, proves the law to be deeply flawed when it comes to protecting investors.

Don’t Miss: Are Facebook Co-Founders SELLING Shares?