Friday, December 7, 2012

Facebook Post Leads to Reg FD Problems for Netflix

Regulation FD requires companies to make announcements of material information to all investors at the same time. Adopted in 2000, the regulation is intended to help insure that all investors receive equal access to information.

Undoubtedly an unattainable goal, but it is the law. This week, Netflix learned that the hard way. Reed Hastings, the chief executive of Netflix, congratulated his team for a job well done in early July. On his public page, he crowed about the one billion hours of video that subscribers watched the previous month. The message was just 43 words.

Now, Netflix and its chief may be in deep trouble for that brief post. On Thursday, Netflix disclosed that the Securities and Exchange Commission was considering taking action against the company and Mr. Hastings for its Facebook communication. The SEC sent Netflix and Hastings a Wells Notice, warning that it may file civil claims or seek a cease-and-desist order.
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