Today, Netflix Inc., stated that it received a warning earlier this week from the securities regulators for violating public disclosure rules with a Facebook (News - Alert) post. A civil action may be taken against the company and its chief executive, in a case that raises questions about how public companies communicate on social media.
Reed Hastings, the CEO of high-profile Silicon Valley, dismissed the controversy by claiming that he did not believe the Facebook post was material information. On July 3rd, on the company's public Facebook page, Hastings posted that for the first time ever in June; Netflix’s monthly viewing exceeded one billion hours. The post was accessible to the more than 244,000 subscribers to the page.
Image via www.netflix.com
The U.S. Securities and Exchange Commission sent Netflix a Wells Notice. This means that over the alleged violation, the SEC (News - Alert) staff will recommend the full commission pursue either a cease-and-desist action and/or a civil injunction against Netflix and Hastings. Adopted in 2000, requiring public companies to make full and fair public disclosure of material non-public information, Netflix may have run afoul of the SEC's Regulation FD.
"We think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers," said Hastings in a letter earlier this week. Furthermore, he claims to disregard the Facebook posting to be material information.
According to Hastings' letter, the SEC believes that the figure is material information and that it should be revealed either in a press release or perhaps a regulatory filing. Hastings, in the public letter to shareholders, added that through the SEC's review process, it remains optimistic and looks forward to clearing the issue.
Together with the letter, the company also submitted a regulatory filing citing the receipt of the "Wells Notice" from the SEC. On July 2, the day before Hastings' post, Netflix's stock jumped from $67.85 a share, to $81.72 on July 5.
Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO Miami 2013, Jan 29- Feb. 1 in Miami, Florida. Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.
Edited by Brooke Neuman