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Hard feelings still remain in the minds of some investors over Facebook’s May 2012 IPO.

Just days before the IPO, analysts working for the underwriters reduced the forecast price of the stock (based an a downgrade of Facebook’s real ad revenue), and the underwriters told their large clients about it, but a vast majority of private investors never got tipped off. When the stock went on sale at $38 per share it lost half its value within a few months.

The Securities and Exchange Commission wondered if Facebook had properly disclosed its real advertising revenue before the IPO.

The Facebook IPO’s lead underwriter, Morgan Stanley, said that making crucial disclosures only to select investors was “standard practice.” The loophole is that while it’s unlawful for the underwriters to “publish” research on pre-IPO companies, there’s no rule against brokers advising key clients of new information over the phone.

Apparently the SEC believes this contention, because it has now dropped its probe into the matter.

In its most recent quarter earnings filing with the SEC, Facebook writes that the SEC “had terminated its inquiry and that no enforcement action had been recommended.”

While Facebook has been removed from the SEC’s probe, the agency may still be investigating the company’s IPO underwriters, including Morgan Stanley.

The Facebook IPO was also marred by a NASDAQ computer glitch, which caused millions in losses for large brokerage houses. The Nasdaq ended up paying out $10 million to settle allegations of securities law violations related to the matter.

Facebook shares closed at $76.90 the day after it announced second quarter earnings, July 23rd.

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