Securities Law, Social Media, And Disclosure

On July 3, 2012, the chief executive officer of Netflix Inc., Reed Hastings, did what many of us frequently do: He updated his Facebook account. However, he updated his account with a post stating that Netflix viewing ''exceeded 1 billion hours'' in the month of June 2012. This post was viewable by more than 200,000 Facebook users. Netflix Inc.'s shares rose 6.2 percent that day, the largest single-day gain in approximately six weeks.

Shortly thereafter, the U.S. Securities and Exchange Commission (''SEC'') sent Netflix Inc. and Hastings a ''Wells Notice'', a notice the SEC provides when it is of the opinion that sufficient wrongdoing has occurred to warrant civil claims. SEC regulation requires that material information must be made available to all investors simultaneously via an SEC filing, a press release, or other acceptable means. The SEC appears to be taking the position that the Facebook post provided material information, and that the Netflix Inc.