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SEC scrutinizing Netflix over Facebook post


While many companies have made social media missteps, Netflix has received notice that the Securities and Exchange Commission may take action over a morale-boosting Facebook post by CEO Reed Hastings.

The SEC issued what is commonly referred to as a Wells notice, alerting Netflix that it may file civil claims or seek a cease-and-desist order following Hasting’s congratulating his team on approaching a major milestone – the amount its subscribers watched was “nearly a billion hours per month.”

At issue is the SEC’s 12-year-old Regulation Fair Disclosure rule, which requires a company to simultaneously and publicly tell investors about anything “material” to their business. That is normally achieved with a regulatory filing or a press release.

Hastings disclosed the Wells notice in another Facebook post, only this time he also filed a K-8 form with the SEC. He also made observations that are likely to be his main defense if the SEC opts to take further steps.

For one, Hastings has 245,000 followers on his Facebook page, which is viewable by even non-Facebook users, and many of them are journalists and bloggers who forwarded, reposted and wrote about the impending milestone. So arguably, one of his Facebook posts is at least as public as a regulatory filing.

For another, Hastings has grounds to doubt the information in his Facebook post was material. He had made posts about viewing hours before without repercussions.

Related links:

SEC – Netflix K-8

New York Times – S.E.C. Warns Netflix Over a Post on Facebook

Reuters – Netflix says CEO’s Facebook post triggered SEC notice

Marketwatch – Friday’s biggest movers; Netflix fades to red

Bloomberg – SEC Urged to Update Disclosure Rules on Netflix Warning

All Things D – For Netflix and the SEC, a Facebook Share Should Be Public Enough

Ars Technica – Sharing corporate info on Facebook isn’t public enough for the SEC

The Street – Netflix SEC Probe Raises Bigger Issues