Netflix + Facebook = SEC Trouble

Many Americans have become accustomed to posting their lives play-by-play on Facebook and Twitter. If you are a high level executive in a corporation, you may want to check with your lawyer before updating your status. According to Reuters, Reed Hastings, CEO of Netflix, is facing the possibility of a civil action from the Securities and Exchange Commission (SEC) after posting the following on his Facebook page:

“Congrats to Ted Sarandos, and his amazing content licensing team. Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we’ll blow these records away.”

The SEC then sent a Wells Notice to Netflix which may result in a cease-and-desist order or an injunction against the company and Hastings. Companies are required “to make full and fair public disclosure of material non-public information.” What could be more public than Facebook? Apparently, Hastings has more than 244,000 subscribers to his page, many of whom he said are reporters and bloggers. Forbes writer Halah Touryalai, explains that while some think the SEC are being petty, they may have a good point.

Hastings argued that the information was not material to begin with even though there was a marked rise in stock price after the post. His post did coincide with a Citigroup report that there was a $130 per share target price for the Netflix stock, which could have caused the rise in price. But, in terms of making the information public to all shareholders, Touryalai argues that if this type of information may be made available via social media – all investors need to know to look for it there. A simple fix such as a link to the Facebook page or a feed of updates on the website, may be the solution.

In any case, if you represent or work with a publicly traded company, consult with your legal department before posting questionable information. If you or someone you may know needs legal or business related counsel we are always available to offer our assistance.

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