Reed Hastings, the chief executive officer of Netflix, Inc. (NASDAQ:NFLX) will not face any sanction from the Securities and Exchange Commission (SEC) in connection with his action in announcing the number of viewers of the company in his account on Facebook Inc (NASDAQ:FB).
The Enforcement division of the agency investigated the online video streaming company to determine whether it violated Regulation FD and Section 13 (a) of the Securities and Exchange Act of 1934 regarding Hastings’ disclosure on Facebook Inc (NASDAQ:FB) that the company streamed 1 billion hours of content in June. According to SEC, neither Netflix, Inc. (NASDAQ:NFLX) nor Hastings used Facebook Inc (NASDAQ:FB) to announce company metrics and Netflix did not inform its shareholders that it will use the CEO’s Facebook account to disclose information about the company.
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Based on the SEC investigation regarding the issue, Netflix, Inc. (NASDAQ:NFLX) briefly discussed in its official blog that people are “enjoying nearly a billion hours” of movies and TV shows per month from the company. According to the agency, the blog was technical in nature and announced a new content delivery to internet service providers. The company did not provide further details regarding its streaming metrics, and did not announce any milestones regarding its streaming hours from January 25 to July 2012.
According to the SEC, Hastings or the company will not be sanctioned by the securities regulator regarding the issue despite the fact that Netflix, Inc. (NASDAQ:NFLX) failed to disclose the information regarding streaming metrics in a public filing. The SEC cited that its reason for pursuing any enforcement action against Hastings or Netflix is due to uncertainty regarding disclosure requirements in social media.
According to SEC, may use social media sites such as Facebook Inc (NASDAQ:FB) and Twiiter to announce important information about the company as long as investors are aware about it.
In a statement, George Canellos, acting director of the SEC’s enforcement division said, “One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information. Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”
In December last year, the SEC issued a Wells Notice to Hastings and Netflix, Inc. (NASDAQ:NFLX) indicating that the agency is considering to pursue an enforcement action regarding the issue.