Netflix (NASDAQ:NFLX) and its CEO Reed Hastings have received notice from the SEC that the regulator is looking into a Facebook (NASDAQ:FB) post Hastings made in July and whether it violates fair disclosure regulations, according to an SEC document filed by the company yesterday.
At issue is a post Hastings made on Facebook on July 1, in which he reported that members had consumed more than 1 billion hours of viewing in June. The company did not issue a press release or file an 8-K with the SEC on the matter. The SEC is concerned that this did not meet guidelines for giving all investors equal access to material information disclosed by publicly traded companies.
SEC staff served a pair of Wells Notices, "indicating its intent to recommend to the SEC that it institute a cease and desist proceeding and/or bring a civil injunctive action against Netflix and Mr. Hastings for violations of Regulation Fair Disclosure," according to the filing.
In a response Netflix filed with the SEC, Hastings wrote: "we think the fact of 1 billion hours of viewing in June was not 'material' to investors, and we had blogged a few weeks before that we were serving nearly 1 billion hours per month." He said he had more than 200,000 Facebook subscribers at the time.
"We remain optimistic this can be cleared up quickly through the SEC's review process," wrote Hastings.
Eric Volkman owns shares of Facebook. The Motley Fool owns shares of Facebook and Netflix and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.