The Se­cu­ri­ties and Ex­change Com­mis­sion, which launched a re­view of Face­book Inc's (FB) May 17 IPO af­ter its stock price plum­met­ed, hasn't found any ev­i­dence that the com­pa­ny with­held ma­te­r­i­al in­for­ma­tion from in­vestors, a per­son fa­mil­iar with the mat­ter said.

The SEC, whose in­ves­ti­ga­tion is con­tin­u­ing, is still look­ing at oth­er IPO-re­lat­ed is­sues, in­clud­ing whether re­tail in­vestors were harmed by mis­lead­ing in­for­ma­tion from bro­kers or se­lec­tive dis­clo­sures to an­a­lysts by the com­pa­ny's bankers re­gard­ing Face­book's mo­bile ap­pli­ca­tions, said the per­son, who asked not to be iden­ti­fied be­cause the probe is con­fi­den­tial.

Any con­clu­sion by the SEC that Face­book made ad­e­quate dis­clo­sures of risks pri­or to its IPO would bol­ster the com­pa­ny's de­fense against civ­il law­suits filed by re­tail cus­tomers dam­aged by the sud­den drop in the com­pa­ny's ini­tial US$38 share price, which is about half that val­ue now.

"The plain­tiffs will say that an­a­lysts were down­grad­ing Face­book be­fore the IPO be­cause peo­ple were mak­ing se­lec­tive dis­clo­sures about mo­bile ap­pli­ca­tions," said John Cof­fee of Co­lum­bia Uni­ver­si­ty Law School. "You have to show there was a ma­te­r­i­al fact not stat­ed in a reg­is­tra­tion state­ment, but Face­book's state­ment does say there was some prob­lem with mo­bile apps. A change in an­a­lyst rec­om­men­da­tions is not some­thing you nor­mal­ly put in SEC dis­clo­sure state­ments."

Com­pa­ny com­ment

The firm had no im­me­di­ate com­ment. SEC spokesman Kevin Calla­han de­clined to com­ment as did Face­book. The SEC is con­duct­ing an "in-depth re­view of all the par­tic­i­pants" in the IPO, SEC chair­man Mary Schapiro said in an in­ter­view Sep­tem­ber 28 on Bloomberg Tele­vi­sion.

The reg­u­la­tor's ini­tial fo­cus in the probe was whether any ma­te­r­i­al in­for­ma­tion was omit­ted from its prospec­tus by Face­book, whether it shared bad news on­ly with a se­lect group, and whether sales peo­ple mis­rep­re­sent­ed de­mand for the so­cial net­work stock to lure small in­vestors. (Bloomberg)