I think sejtam is confused. If you look at his screenshot, it shows all of his notifications are read and his "Notifications" menu button is gray, not orange, indicating he has no unread notifications. So it appears to be functioning for him the way that it should be.
For sejtam: I suspect that you think that after you read or acknowledge a notification, your expectation is that the notification should disappear entirely from the list, or perhaps that the Notifications button should go away until a new, unread notification shows up. This is not how it works. The Notifications button is always present, and it will always list your last 5 most recent notifications in that list, whether or not you have read or acknowledged them.
This is not a bug; this is how it is designed to work. It works just like Facebook notifications do, so think of it that way: after you click on a notification in Facebook, it is marked as "read", but it doesn't disappear from the list. You can always go back and see a history of all of your notifications.