The Risks of Social Media: Facebook Post Attracts Securities and Exchange Commission "SEC" Action
We’ve written about the perils of careless social media use time and time again on the Monitor and in Risk Management. And no matter how many company-wide memos are issued or how many training courses are thrust upon employees, as long as social media exists, there will be those that, whether intentionally or innocently, create a reputational or regulatory nightmare for their employer or another company.
Reed Hastings, the CEO of Netflix, is one of them. The active Facebook user commonly posts about the success of Netflix, often thanking users of the service for their loyal support, which sounds like the first line from a book on how to correctly promote a product using social media. But Hastings may have become a little too comfortable sharing certain aspects of the company’s information.
In July of this year, he posted to his 240,000+ Facebook subscribers that “Netflix monthly viewing exceeded 1 billion hours for the first time ever in June.” That type of boastful post may seem like nothing more than a proud CEO to many, but to the Securities and Exchange Commission, it was quite possibly an illegal statement. On DEcember 5, 2012, the SEC issued Netflix a Wells Notice, which means SEC staff will recommend that the SEC issue either a cease-and-desist action and/or a civil injunction against Netflix and Hastings over the alleged violation.
Did Hastings violate rules regarding selective disclosure? Should all companies, especially those the size of Netflix, have legal counsel review all social media posts representing the company’s views? Should every company employ a social media risk manager?
It seems we’re getting there.