Social media cloud rules of disclosure as SEC may sue Netflix over CEO's Facebook comments
By Bloomberg News
Published: Saturday, Dec. 8, 2012, 12:01 a.m.
Regulators, probing comments posted by Netflix Inc. Chief Executive Officer Reed Hastings on Facebook, are being urged to reconsider disclosure rules set up years before the advent of social media.
Netflix said it may be hit with a Securities and Exchange Commission civil lawsuit after Hastings told Facebook followers in July that Netflix customers watched more than 1 billion hours of videos the prior month, according to a filing Thursday.
The company said it did not issue an accompanying press release or make a filing with regulators.
Companies and executives are increasingly relying on sites such as Facebook and Twitter Inc. — alongside news wires and other more traditional outlets — to communicate with the public.
It's time for the SEC to update its policies to account for the widening role played by social media in helping companies be more transparent, said Stephen Diamond, associate professor of law at Santa Clara University.
“The SEC rules are 12 years old, and in the technology world, that might as well have been in the last century,” said Diamond. “The SEC has always encouraged issuers to be more forthcoming. Here's a medium which allows investors, quite easily and cheaply, to listen to what the CEO or other insiders are saying.”
The SEC adopted its fair disclosure regulations, known as Reg FD, in 2000 to inhibit companies from sharing sensitive information in a selective manner.
The case against Netflix may hinge on whether Facebook or other social sites can be considered as public an arena as a company blog or a broadly disseminated press release. The outcome will have implications for other executives who share information through tweets and other consumer-Web networks.
Tesla Motors Inc. CEO Elon Musk said on Twitter this week that his electric vehicle company is cash-flow positive, and Google Inc. executive Andy Rubin took to the microblogging site in June to say that 900,000 Android phones had been activated.
By using Reg FD to restrict disclosure via social media sites, the SEC could stifle the adoption of these tools in business, said Howard Lindzon, CEO of online-investing community StockTwits Inc.
“This is a warning shot for CEOs to be more careful,” Lindzon said. “They are locking down silos on how these CEOs communicate.”
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Fliers to absorb increase in security fee
- PNC plans to do away with tellers
- Pace of enrollments on Healthcare.gov more than double, government says
- RBS paying $100M to settle US, NY sanction claims
- Consol acquires drilling rights from Dominion
- Fab Universal disputes kiosk claims; will restate earnings
- Barra breaks GM glass ceiling
- Credit card companies offer free credit scores
- Nestle cuts ties with farm over dairy cow abuse
- Pennsylvania, other states considering bids to host Boeing 777X production
- Unemployment rate falls as employers add 203,000 jobs nationwide