Online video giant Netflix said Thursday it faces a possible penalty
from US regulators for comments made by its top executive on his
Facebook account about subscriber activity.
The company made the disclosure in a regulatory filing as well as in another Facebook posting by CEO Reed Hastings.
The company said it received a "Wells Notice" from the SEC which means that some enforcement action is likely to be taken.
civil action is possible because of Facebook postings by Hastings,
which stated that its customers were spending around a billion hours per
month watching Netflix.
Under SEC rules, any information
important to shareholders should be disclosed publicly in a regulatory
filing known as an 8K form.
"SEC staff informed us yesterday that
they are recommending that the SEC bring a civil action against us for
my July, one billion hour public post, asserting we violated 'Reg FD,'"
the CEO said.
"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."
Nonetheless, Hastings called this a "fascinating social media story" and defended his actions.
think posting to over 200,000 people is very public, especially because
many of my subscribers are reporters and bloggers," he said on
"We don't currently use Facebook and other social media
to get material information to investors; we usually get that
information out in our extensive investor letters, press releases and
SEC filings. We think the fact of one billion hours of viewing in June
was not 'material' to investors."
Hastings said he was "optimistic this can be cleared up quickly through the SEC's review process."