Back in July, the CEO of Netflix wrote a Facebook post on his public page, congratulating employees on a job well done. Reed Hastings wrote just 43 words, touting the 1 billion hours of video subscribers had watched in June.
Now, Hastings and Netflix may face legal penalty over the seemingly innocuous post.
On Thursday, Netflix disclosed the Securities and Exchange Commission filed official documents over the incident, alerting Hastings and Netflix of a pending investigation through what is called a “Wells notice.” According to the official filing, the SEC is now simply “indicating […] intent to recommend to the SEC that it institute a cease and desist proceeding and/or bring a civil injunctive action against Netflix and Mr. Hastings” for the post.
Hastings took to his Facebook page once again to announce the news. "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," he wrote.
The SEC is worried Hastings violated Regulation Fair Disclosure rules, for not making the information in the July post available to all Netflix investors at once. They say the information should have been made public through a press release or other means, to accommodate "full and fair" access to the data.
Why a public post on a public Facebook page was not sufficiently public is unclear. But a Wells notice indicates the action was recommended by investors, rather than at the behest of the SEC. The debate over Hastings’ post will come down to whether or not the release of the information through that channel is sufficiently “public” or official. Reed has over 244,000 subscribers to his Facebook feed.
Reed claims the billion-hour figure is not a significant figure to investors. Hastings wrote that Netflix will "remain optimistic this can be cleared up quickly through the SEC's review process."
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