Fair Disclosure And Facebook Posts

Social media sites have proved to be invaluable platforms on which public companies may communicate with their customers and investors, but those added benefits have come with some potential pitfalls for company management. On December 5, 2012, Netflix and its CEO Reed Hastings received a Wells Notice from the Securities and Exchange Commission. This type of notice is meant to inform a party that the SEC intends to bring an enforcement action against it and provides the party with an opportunity to explain why the enforcement action is inappropriate.

The comments prompting this Wells Notice were made by Hastings on July 3, 2012. Posting to his personal Facebook page, Hastings stated that "Netflix monthly viewing exceeded 1 billion hours for the first time ever in June." The SEC believes this comment violated Regulation FD, a rule adopted to address the selective disclosure of information by public companies. The SEC summarizes Regulation FD as follows: when an issuer