Netflix draws SEC scrutiny over Facebook post 'violating disclosure rules' for firms
American online media streaming service, Netflix and its CEO Reed Hastings could face face a civil action for a Facebook post, that US Securities and Exchange Commission (SEC) staff allege, violated disclosure rules that require companies to release important information to all investors at the same time.
It comes after Hastings on July 3 put up a public Facebook post to more than 200,000 Facebook followers, announcing that Netflix members had watched more than 1 billion hours for the first time in June.
The message has since received more than 250 likes and was shared more than 30 times, but the company did not issue a press release or file a document with the SEC about the news, the CNN reports.
According to the report, Netflix disclosed in a SEC filing on Thursday that the company and Hastings had received a Wells notice from SEC staff, warning of the agency's intentions to file civil charges for violating Regulation Fair Disclosure. The rule bans the selective release of material information.
"SEC staff questions a Facebook post. Fascinating social media story," Hastings said in a regulatory filing that he also posted to his Facebook page.
He argued that the company considered a post to more than 200,000 people as "very public", particularly because several of the executive's Facebook subscribers were reporters and bloggers, adding that while the company believed that the post was public, the 1bn viewing hours fact was not "material" to investors because it previously had signalled in a blog post that it was approaching the milestone, the report said.
He also said the company typically released important information via investor letters, press releases and SEC filings, it added.
SEC staff will now present the case to commissioners, who will vote on whether or not to sue the company. The case is likely to be watched by corporations that increasingly tap social media to disseminate information, the report concluded.