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ARTICLE · 09 APRIL 2013

Social Media, Disclosure And Securities Regulation

McCarthy Tétrault
McCarthy Tétrault
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McCarthy Tétrault

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On July 3, 2012, the CEO of Netflix Inc.updated his Facebook account, which resulted in the SEC serving him with a "Wells Notice".

CanadaCorporate/Commercial Law
Roland Hung
Roland Hung
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On July 3, 2012, the CEO of Netflix Inc. did what many of us frequently do: 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. This post was viewable by over 200,000 Facebook fans. Netflix Inc. shares rose 6.2% that day, the largest single day gain in approximately 6 weeks.

Shortly thereafter, the Securities and Exchange Commission ("SEC") provided Netflix and the CEO with 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, press release or other acceptable means. The SEC appears to be taking the position that the Facebook post provided material information, and that the Facebook account of the CEO was not public.

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