[ by Larry Goldfarb ] Everything about the Facebook initial public offering has been unusual or unique.  It was the most anticipated IPO of all time, it raised the most money of any Internet company, and its first day of trading was plagued by numerous programming problems that caused delays throughout the trading session.  The technical problems also caused more customer orders to be passed over and not get executed, while saddling broker-dealers and market makers with combined losses of at least $100 million in losses - most of those losses probably will never be paid back to the brokers by those responsible - including Nasdaq OMX. The Facebook also spawned more than the usual number of high-level questions and legal debates - pitting lawyers, educators, traders, bankers, institutional investors and current or former regulators, along with their differing view, against one another. Take, for example:

Did underwriters selectively disclose information to their large institutional customers, that ultimately caused large losses for thousands of small retail investors?  Did Facebook and/or its underwriters violate securities laws?

Below, C-I has addressed several questions that have gotten much of the attention over the past few days. Was the prospectus inaccurate? Federal securities law is clear about the veracity of the prospectus.  If, for example, the Facebook prospectus is materially inaccurate, then Facebook and its underwriters could be on the hook for severe regulatory sanctions and investor lawsuits.  Facebook, in fact, amended its Registration Statement on 5/9/12, about a week before the it was due to go public.  The revision noted that growth in advertising had failed to keep up with user gains.  Facebook then contacted more than 20 analysts, including those with underwriters Morgan Stanley, Goldman Sachs. and JPMorgan Chase, to explain why the numbers were moved closer to lower end of its second-quarter sales estimate, according to a person with knowledge of the matter.  Analysts then lowered their projections and informed their subscribing clients. Under current rules, this is common practice and is not illegal.  The fact that the individual investor was not made privy to the information may not be considered material given that he or she could have gone online and reviewed the prospectus.  The fact that the larger institutional investors had better information is not a surprise given that they spend significant sums to analyze financial information. Did the analysts who attended the Facebook road shows obtain materially different information than what was contained in the updated prospectus? Again, this would violate securities laws.  All involved say no.  Any lawsuit will have to prove that the information Facebook and its bankers gave investors was material, or important, said Jeffrey Manns, professor of banking and securities law at George Washington University.  "Materiality is a moving target, it depends on a number of moving factors," said Kelly.  "It's first a decision for a judge and ultimately a jury." Was the fact that the analysts adjusted their estimates material to the IPO? "The fact that underwriters took down their earnings estimates is material information," said Sam Rudman, a partner at Robbins Geller Rudman & Dowd LLP, whose firm is handling the New York shareholder suit.  "There isn't any investor in Facebook that wouldn't have wanted to know that." If the analysts' revisions were based on the public disclosures, banks wouldn't have needed to disclose them to all participants, said Boston University School of Law's Frankel.  If the revisions were based on inside information that other investors didn't have, "that may create a problem."  There is no evidence that the estimate adjustments were no more than a quantification of the revised prospectus.  In that case, it would not be a material event.  In short, the size and prominence of Facebook's IPO may have made it more of a target for shareholder suits, regardless of the facts at hand, said Dennis Kelly, chairman of government investigations and white collar crime at Burns & Levinson. Article Source [Bloomberg, 5/23/12]