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Hastings: SEC Seeks Civil Action for My Facebook Post

12/06/2012 6:52 PM

The SEC thinks Netflix CEO Reed Hastings may have violated its fair-disclosure rules by bragging on Facebook -- but he disagrees.

On the morning of July 3, Hastings posted a pithy congrats on his public Facebook page to content chief Ted Sarandos and his team for delivering more than 1 billion hours of video to subs in June. The company's stock rose 6.2% on the 3rd, then increased 13.4% on July 5 after the Independence Day break.

That original post read: "Congrats to Ted Sarandos, and his amazing content licensing team. Netflix monthly viewing exceeded 1 billion hours for the first time ever in June. When House of Cards and Arrested Development debut, we'll blow these records away. Keep going, Ted, we need even more!"

On Thursday -- also on Facebook -- Hastings disclosed that the SEC intends to bring a civil action against him and Netflix over that comment, for violating the Regulation Fair Disclosure rule.

"SEC staff questions a Facebook post," he wrote. "Fascinating social media story."

Hastings pointed out that Netflix had the previous month posted on its blog that members were watching “nearly a billion hours per month” of Netflix, and the company did not issue a press release or 8-K filing about this.

"The SEC staff believes that I gave you all 'material' investor information in my post and that we needed to instead release the June viewing fact 'publicly' with an 8-K filing or press release," Hastings wrote.

But Hastings argued that posts on his public Facebook page, which currently has 245,110 followers, "is very public, especially because many of my subscribers are reporters and bloggers." And anyway, he asserted, the 1 billion hours stat was not “material” to investors. Finally, according to Hastings, the rise in Netflix's stock price was "likely driven by the positive Citigroup research report the evening before."

The SEC has declined to comment on the matter.

For the record, Netflix did file an 8-K with the SEC on Thursday disclosing that the company had received notice of the potential action that included Hastings' comments in the Facebook post.

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