Netflix, CEO Reed Hastings get SEC warning

The Securities and Exchange Commission issued a "Wells Notice" to online video streaming business Netflix and its CEO Reed Hastings, the company said Thursday.

The move arises from regulators' determination that Hastings violated Regulation Fair Disclosure, a rule that requires companies to share material and non-public information with all investors. Netflix disclosed the receipt of the Wells Notice in a regulatory filing.

The Securities and Exchange Commission declined comment.

Hastings wrote in an regulatory filing the SEC's allegation stems from a posting he made on Facebook in early July. In that post, Hastings told the 200,000 people who subscribe to his posts that Netflix members have viewed more than 1 billion hours of programming on the service in June. The company did not file an official regulatory filing disclosing that information.

Hastings disputes the allegation, saying that having 200,000 followings on Facebook made the Facebook disclosure public. He says the fact regarding the 1 billion hours of viewing not only wasn't material, but had already been disclosed on a public blog.

He also says that while Netflix' stock rose the day he posted on Facebook, the stock's rise started before the mid-morning post as made and likely driven by a positive Citigroup research report.

"We remain optimistic this can be cleared up quickly through the SEC's review process," Hastings wrote.

USA Today