CEOs — Not Just Teens — Can Get in Trouble on Facebook

The SEC is investigating whether a Facebook post by Netflix CEO Reed Hastings violated its Fair Disclosure Regulation.

When can a CEO’s Facebook post get his or her company in big trouble?

It can if the post triggers an SEC investigation. And that’s what happened after Netflix CEO Reed Hastings posted on his Facebook page this past July that his customers viewed more than 1 billion hours of video content during the previous month. That figure averages out to about 38 hours of viewing per month per subscriber, a jump from the estimated 28 hours of online viewing from December 2011.

The problem?

That note may have run afoul of the SEC’s Regulation FD requiring that the release of any information of material interest to investors be done broadly in a non-discriminatory way to the public. And currently, acceptable manners of doing so means filing with the SEC, or via other prescribed methods such as a posting on the firm’s Web site, and/or issuing a press release.

It does not – at least as for now – include an announcement via Facebook. (See the Facebook post here.)

Earlier this month, in response to Hastings? post, the SEC sent Netflix a Wells Notice that recommends its regulators institute a cease-and-desist proceeding and/or bring a civil injunctive action for violations of the agency’s fair disclosure rules. In response, Hastings stated on December 6 (once again, via his Facebook page) that “we think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers.” But the SEC has not said it agrees.

There has also been some discussion online as to whether or not the actual information shared by Hastings is truly of material interest to investors, and on his December 6 Facebook post, Hastings claimed it is not. But it probably doesn?t help his case that the day of the posting, Netflix?s stock rose 13%. (Hastings argues in the same Facebook post that that the rise was most likely caused by a positive Citigroup research report released the evening before.)

CEOs are, in fact, increasingly posting on social media including Twitter; see “140 Characters of Risk: Some CEOs Fear Twitter,” from the Wall Street Journal this past September. But until it’s decided that Facebook counts as a public forum, publicly held companies should make sure their social media posts do not share anything that could be construed as relevant to their investors.