Netflix CEO Won’t Face SEC Claims Over Facebook Disclosures

Netflix Inc. Chief Executive Officer Reed Hastings won’t face regulatory sanctions for announcing monthly viewership results on his Facebook page even though the company didn’t report the information in a public filing, the U.S. Securities and Exchange Commission said today.

The SEC refrained from bringing an enforcement action against Hastings or Netflix, which runs a subscription service for watching television programs and movies, because of uncertainty about how disclosure requirements pertain to social media, the agency said in a statement. Instead, the SEC released a report of its investigation that says companies can use social media outlets such as Facebook and Twitter to announce key information so long as investors have been told where to look.

“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” George Canellos, acting director of the SEC’s enforcement division, said in a statement. “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”

Hastings stirred controversy over SEC disclosure guidelines when he wrote in a July 3 post on Facebook Inc.’s website that viewing on Netflix’s video-streaming service had “exceeded 1 billion hours for the first time” in June. The incident led to calls for the SEC to broaden its rules to allow social media to be used to communicate to investors.

In December, Hastings and Netflix each received a Wells Notice, indicating SEC staff intended to pursue enforcement action in the matter. That same month, Hastings said that posting to his Facebook contingent of 200,000 followers “is very public.”

“We appreciate the SEC’s careful consideration and resolution of this matter,” said Joris Evers, a spokesman for Netflix, which is based in Los Gatos, California.

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