The Securities and Exchange Commission might file a civil
claim against Netflix (NASDAQ:
) CEO Reed Hastings after he bragged about the company's success
on Facebook (NASDAQ:
). According to
, Hastings used the social network to announce that Netflix
viewing exceeded one billion hours last June. The post, which was
published on July 3, helped raise Netflix's value by 6.2 percent
that day. Now the SEC alleges that Hastings has violated rules
governing selective disclosure.
Hastings turned to Facebook -- the place where this all began
-- to speak about the allegations.
"In early July, I publicly posted on Facebook to the over
200,000 of you who subscribe to me that our members had enjoyed
over 1 billion hours in June, highlighting how strong our content
was," Hastings wrote
in a new post
. "There was press coverage as there are many reporters and
bloggers among you, my public followers. Some of you re-posted my
post. Again, we did not also issue a press release or file an 8-K
"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.' 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
Hastings went on to explain that by posting to over 200,000
people -- including bloggers and reporters -- his announcement
was "very public." He also said that Netflix does not currently
use Facebook to distribute material information to investors.
Instead, the company uses "extensive investor letters, press
releases and SEC filings."
"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,"
"Finally, while our stock rose the day of my public post, the
increase started well before my mid-morning post was out, likely
driven by the positive Citigroup research report the evening
Hastings said that he remains "optimistic" that this will be
cleared up quickly through the SEC's review process.
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