On July 3rd, the CEO of Netflix Reed Hastings posted a message on Facebook indicating that users of the online video-streaming service had surpassed 1 billion hours of viewing. The stock price of the company rose 6.2 percent that same day. The SEC apparently wasn't too happy about this. They have sent the company a Wells Notice, which indicates that sufficient wrongdoing has occured to warrant a civil lawsuit. Why would the SEC sue over a Facebook post? In 2000, the SEC announced Regulation Fair Disclosure or Reg FD which requires that material information from publicly-traded companies be disseminated to investors in a "non-exclusionary" way like a press release. This is to prevent some investors from having more information than others in order to make investment decisions. It appears that even though Netflix has over 200,000 followers on Facebook, a social media post doesn't qualify as non-exclusionary. With more company CEOs using social media, this may become a test case to determine if social media accounts like Facebook and Twitter violate Regulation FD or if they will be added to the list of approved methods of communications.
Learn more at Bloomberg BusinessWeek.
Read more Finance Watch articles.