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Netflix Facebook Comment Triggers Possible SEC Civil Action

By - Source: Business Insider | B 15 comments

Here's a good example of how you should watch what you say on Facebook.

BusinessInsider reports that Netflix and its CEO Reed Hastings has received a Wells Notice based on something the CEO recently said on Facebook. A Wells Notice is provided by the U.S. Securities and Exchange Commission when it's instituting a cease and desist proceeding and/or bringing a civil injunctive action against a specific organization.

According to the Wells Notice, Netflix Hastings may have "violated the Regulation Fair Disclosure, Section 13(a) of the Securities Exchange Act and Rules 13a-11 and 13a-15 thereunder." The offending comment made on Facebook was actually posted back in July, and possibly caused the company's stock to immediately climb 6-percent.

What did Hastings say? Only that Netflix users had streamed 1 billion hours in June for the first time ever. That really doesn't sound like a big deal, but the SEC reportedly thinks it was material information that should have been distributed across the proper PR channels rather than on a social network. Even more, Netflix didn't even issue an 8-K about the information – the company relied on the public followers on Facebook and the resulting press coverage instead.

Naturally Hastings had something to say about his new Wells Notice, and did so on Facebook.

"SEC staff informed us yesterday that they are recommending that the SEC bring a civil action against us for my July 1 billion hour public post, asserting we violated 'Reg FD'," Hastings said on Facebook. "This rule is designed to ensure that individual investors have equal access to information as large institutional investors, by prohibiting selective disclosure of material information. The SEC staff believes that I gave you all 'material' investor information in my post and that we needed to instead release the June viewing fact 'publicly' with an 8-K filing or press release."

According to Hastings, who is also on Facebook's board of directors, posting to over 200,000 people is very public – many followers are reporters and bloggers anyway. He said Netflix also provides material information to investors through "extensive" investor letters, press releases and SEC filings, not via Facebook. Even more, the stock didn't rise due to his Facebook post – it was likely due to a positive research report provided by Citigroup the night before, he said.

"We think the fact of 1 billion hours of viewing in June was not 'material' to investors, and we had blogged a few weeks before that we were serving nearly 1 billion hours per month," Hastings stated. "We remain optimistic this can be cleared up quickly through the SEC’s review process."

 

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  • 21 Hide
    davewolfgang , December 7, 2012 12:17 PM
    Really? I mean REALLY??? Did the people at the SEC who REALLY inside trade "not make enough money" because they didn't get a pre-warning of this news?

    And yes, I did mean exactly what I typed.
  • 12 Hide
    Star72 , December 7, 2012 12:34 PM
    davewolfgangReally? I mean REALLY??? Did the people at the SEC who REALLY inside trade "not make enough money" because they didn't get a pre-warning of this news?And yes, I did mean exactly what I typed.


    They are coming after you next for that comment. ;) 
  • 11 Hide
    wanderer11 , December 7, 2012 12:55 PM
    You can't really get any more public that posting it to facebook. This just shows how outdated the SEC is.
Other Comments
  • 21 Hide
    davewolfgang , December 7, 2012 12:17 PM
    Really? I mean REALLY??? Did the people at the SEC who REALLY inside trade "not make enough money" because they didn't get a pre-warning of this news?

    And yes, I did mean exactly what I typed.
  • 12 Hide
    Star72 , December 7, 2012 12:34 PM
    davewolfgangReally? I mean REALLY??? Did the people at the SEC who REALLY inside trade "not make enough money" because they didn't get a pre-warning of this news?And yes, I did mean exactly what I typed.


    They are coming after you next for that comment. ;) 
  • 8 Hide
    mrmaia , December 7, 2012 12:40 PM
    This is the most ridiculous thing I read this week.

    Such "data" would be published by the media the very next day, and so happened. If one investor learned about it thru a site such as Tom's, will it be sued as well?
  • 5 Hide
    Anonymous , December 7, 2012 12:55 PM
    Facebook CLEARLY states that any material posted on facebook is their property and not the property of the owner any more, and facebook are free to do with it what they want, and sell I, etc etc.

    Facebook should be paying this fine for their post about Netflix, which they allowed people to see. Assuming anyone should even have to pay for pondering their thoughts on facebok
  • 11 Hide
    wanderer11 , December 7, 2012 12:55 PM
    You can't really get any more public that posting it to facebook. This just shows how outdated the SEC is.
  • 6 Hide
    jojesa , December 7, 2012 1:27 PM
    davewolfgangReally? I mean REALLY??? Did the people at the SEC who REALLY inside trade "not make enough money" because they didn't get a pre-warning of this news?And yes, I did mean exactly what I typed.
    Those
    Old farts they should get into the program. They're mad cause they did not find out first...

  • 0 Hide
    arnoldlouie , December 7, 2012 1:37 PM
    Just like that they can increase the stock. It is not allowed since sensitive data are not allowed in facebook like nude photos and the like. Yes, we don't see sensitive information on facebook.
  • -2 Hide
    guruofchem , December 7, 2012 2:53 PM
    This doesn't seem like something the SEC should attack, but using online postings to manipulate stocks has gone on, and the SEC needs to get into the 21st century in dealing with it.
  • -2 Hide
    ddpruitt , December 7, 2012 3:11 PM
    I guess the SEC thinks that people who know how to use Facebook are a selective group, Democrats ;) 
  • 1 Hide
    f-14 , December 7, 2012 3:49 PM
    why isn't the SEC going after congress members who openly violated regulations. they can't be convicted of any crime while holding office but they can be charged and can also be forced to give up and give back all they stole from insider trading as well as brought to congressional hearings and censure.
  • 2 Hide
    blurr91 , December 7, 2012 4:23 PM
    f-14why isn't the SEC going after congress members who openly violated regulations. they can't be convicted of any crime while holding office but they can be charged and can also be forced to give up and give back all they stole from insider trading as well as brought to congressional hearings and censure.


    Cutting off their own meal ticket?
  • 0 Hide
    yeesh , December 7, 2012 5:08 PM
    f-14why isn't the SEC going after congress members who openly violated regulations. they can't be convicted of any crime while holding office but they can be charged and can also be forced to give up and give back all they stole from insider trading as well as brought to congressional hearings and censure.

    I'm guessing it's because what the hell are you talking about?
  • 1 Hide
    jhansonxi , December 7, 2012 6:57 PM
    mrmaiaThis is the most ridiculous thing I read this week.Such "data" would be published by the media the very next day, and so happened. If one investor learned about it thru a site such as Tom's, will it be sued as well?
    It's not the goal they care about, it's the process. They're bureaucrats - having a worthy goal isn't the point.
  • 2 Hide
    ubercake , December 7, 2012 6:58 PM
    Too many 'little people' must have made too much money. When that happens, the SEC is there to put a stop to such a distribution of wealth. The proper channels meaning to let politicians know first as they are immune to insider trading laws.
  • 1 Hide
    yeesh , December 7, 2012 7:31 PM
    ubercakeToo many 'little people' must have made too much money. When that happens, the SEC is there to put a stop to such a distribution of wealth. The proper channels meaning to let politicians know first as they are immune to insider trading laws.

    I'd just like to explain to anyone who might wonder about the above comment that, in fact, nothing like the situation therein described ever happens. No one has ever accused the SEC of being particularly effective in ANY of its enforcement roles, and there's certainly no Robin Hood angle to this story. It's not as if some public Facebook post were a font of free money and that mean old scary government moved in to shut it down at the behest of shadowy overlords. Here in America, the financial overlords are right there in your face, and their agendas are perfectly clear and public.

    When the SEC does go after somebody, it is never a "little person", and it's certainly never a benevolent insider who was spreading wealth to "little people." Because real insiders are inevitably out to enrich themselves.

    In what way were "little people" making money? In no way. What are some times the SEC has somehow stopped a (downward) redistribution of wealth? There are none. In what way are politicians immune to prosecution? They aren't. What insider trading are you talking about? Wall street doesn't give politicians secret stock tips; wall street publicly donate cash money and hooks politicians up with very sweet.jobs when they leave office.

    I'm just sayin'.
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