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Netflix Facebook Comment Triggers Possible SEC Civil Action

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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  • davewolfgang
    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.
    Reply
  • Star72
    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. ;)
    Reply
  • mrmaia
    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?
    Reply
  • 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
    Reply
  • wanderer11
    You can't really get any more public that posting it to facebook. This just shows how outdated the SEC is.
    Reply
  • jojesa
    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...

    Reply
  • arnoldlouie
    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.
    Reply
  • guruofchem
    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.
    Reply
  • ddpruitt
    I guess the SEC thinks that people who know how to use Facebook are a selective group, Democrats ;)
    Reply
  • f-14
    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.
    Reply