SEC allows corporate disclosures on social media

The agency expanded its previous disclosure guidance following an investigation into Netflix

On July 3, 2012, Netflix Inc. CEO Reed Hastings posted a seemingly simple message to his personal Facebook page that read in part: “Netflix monthly viewing exceeded 1 billion hours for the first time ever in June.”

Neither Hastings nor his company had publicly shared these streaming numbers before. Perhaps for that reason, the Securities and Exchange Commission (SEC) didn’t find Hastings’ posting so innocuous, especially considering that Netflix’s stock quickly jumped from $70.45 at the time of the post to $81.72 by the end of the following trading day. 

But in a response filed with the SEC, Hastings maintained that his Facebook page was hardly private, given that it had more than 200,000 subscribers, including reporters. He also disputed that the streaming statistic was “material” to investors, arguing that the increase in Netflix’s stock on the day of the post was instead attributable to a Citigroup research report.

Although the SEC did not pursue an enforcement action against Hastings or Netflix, it did not give its unqualified endorsement to the use of executives’ personal social media accounts for information distribution, saying that, without advance notice, such use “is unlikely to qualify as a method ‘reasonably designed to provide broad, non-exclusionary distribution of the information to the public. This is true even if the individual in question has a large number of subscribers, friends, or other social media contacts.”

Alanna Byrne

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