Were Facebook’s unlucky investors naive, misinformed—or misled?

Facebook’s NASDAQ debut was just two weeks ago, but questions about its bellyflop of an IPO still haven’t gone away. Federal regulators are examining if there was legal wrongdoing by Facebook or its underwriters, but the concerns don’t stop there, as I reported this weekend:

[T]here are three major questions swirling around the troubled IPO: what caused the technical glitches that disrupted Facebook’s NASDAQ debut; whether Facebook gave privileged information to certain analysts and investors; and whether Morgan Stanley, the IPO’s lead underwriter, gave conflicting messages to different kinds of investors before the offering.

For some in Congress, if federal regulators come up empty-handed, that could be an even greater cause for concern. “This IPO is a poster child for all that’s wrong with current practices,” Sen. Richard Blumenthal (D-Conn.) said in an interview. Whether or not the SEC or other regulators bring down the hammer, he believes that Facebook’s IPO is a clear sign that capital markets are rigged against ordinary “mom and pop” retail investors....

“You wonder, isn’t there something wrong with this picture? Where the underwriters selectively pick [who should receive] information, then the public is not only permitted but encouraged to participate?” he said. Whether the SEC finds any enforceable violations, Blumenthal thinks there could be a need to review and expand securities regulations to help level the playing field when companies go public.

More specifically, Blumenthal and other Senate Democrats want to revisit the recently passed JOBS Act, which loosened regulations on IPOs for “emerging companies,” reducing their disclosure requirements to investors.

You can read the whole story here.