* SEC will seek more comments on Nasdaq's proposal
* Nasdaq has proposed $62 million compensation package
* SEC: more time needed to review ``legal and policy'' issues
* Agency says some commenters expressed concerns
WASHINGTON, Oct 29 (Reuters) - U.S. securities regulators are taking a closer look at Nasdaq OMX's $62 million plan to compensate brokers who suffered losses from the exchange operator's botched handling of Facebook's initial public offering.
The U.S. Securities and Exchange Commission said it was instituting proceedings to more closely review the plan in light of the ``legal and policy issues raised'' by other market players.
``The Commission believes that questions are raised as to whether Nasdaq's accommodation proposal... would promote just and equitable principles of trade, protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers,'' the SEC wrote in a notice posted online on Monday.
A Nasdaq spokesman declined to comment on the SEC's decision to extend the timeframe for reviewing the proposal. However, on the company's earnings call earlier this month, Nasdaq Chief Executive Bob Greifeld said he anticipated such a move by the SEC.
``To the extent the SEC requires more time, then we would agree to that, so I'm not here to predict what they may do, but end of the year is a reasonable guess,'' Greifeld said at the time.
Market-makers like Knight Capital Group Inc, UBS AG, Citigroup Inc, and others, say they collectively lost around $500 million on May 18 when Facebook first debuted on public markets. A technology issue delayed the IPO for 30 minutes and in the interim, many orders were not included in the opening cross.
That led to delays in many clients' orders being put through and hours-long waits for confirmations.
Some orders were lost all together, while others were entered repeatedly when market-makers did not receive the electronic confirmations they expected. Those usually arrive within seconds.
Nasdaq has since disclosed that the SEC's enforcement division is investigating the series of events leading up to the $16 billion IPO.
Nasdaq had originally drafted a $40 million compensation plan for brokers who lost money, but later raised it to $62 million amid criticism that the amount was too low.
Since then, some market-makers and brokers have said they would back the amended proposal. But other market participants have continued to balk at the sum being offered.
The SEC's latest announcement that it will ``institute proceedings'' to determine whether or not to approve or disapprove Nasdaq's proposal is a new, procedural change created by the 2010 Dodd-Frank financial reform law.
The law aimed to streamline the process for the commission to review rule changes filed by exchanges, which act as self-regulatory organizations.
It requires the SEC to either approve, disapprove or institute such proceedings for proposed rule changes no more than 45 days after an exchange submits it for consideration.
If the SEC does not act within the 45 days, the rule automatically gets approved. In this case, the deadline for the SEC to act was Oct. 30.
Typically the SEC will institute proceedings to more closely review rule changes if they are novel, complicated or somewhat more controversial.
A decision to institute proceedings ``does not indicate that the Commission has reached any conclusions,'' the SEC said in its notice.
The SEC will seek additional public comments to help it reach a final decision on whether to accept Nasdaq's compensation plan proposal.
The agency said among the main complaints it has already received from commenters include concerns about the ``limited categories'' of claims eligible for compensation, Nasdaq's method for determining losses and a requirement for member firms to waive all claims against the exchange operator for their losses.