Regulation FD

Last week, Netflix announced that it received a Wells notice from the SEC. Apparently, while the SEC was cruising Facebook (what else is there to do while neglecting to investigate Wall Street?), someone noticed Netflix CEO Reed Hastings posting that Netflix had surpassed one billion hours of streaming old episodes of Facts of Life to shut ins.

The SEC staff thinks Hastings disclosed material information in this Facebook post, possibly violating Reg FD, the 2000 regulation that put a stop to companies giving an advantage to small subsets of investors by disclosing material information between blowing rails of coke off strippers.

But Facebook isn’t a seedy strip club full of free drugs and prostitutes (read: Christian Mingle). Reed Hastings has over 200,000 “fans,” many of whom are analysts and reporters. In pursuing enforcement without exercising a little discretion, the SEC ignores these facts.

Netflix is arguing that the disclosure was not material and that most investors knew that the CEO’s Facebook page is recognized as an avenue for public disclosure.

Regardless of the specific resolution of this matter, this is one more reminder that the SEC is woefully behind when it comes to adapting to technological developments. Like, oh I don’t know, HFT perhaps?

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