The Securities and Exchange Commission issued a "Wells Notice" toonline video streaming business Netflix and its CEO Reed Hastings, thecompany said Thursday.
The move arises from regulators'determination that Hastings violated Regulation Fair Disclosure, a rulethat requires companies to share material and non-public informationwith all investors. Netflix disclosed the receipt of the Wells Notice ina regulatory filing.
The Securities and Exchange Commission declined comment.
Hastingswrote in an regulatory filing the SEC's allegation stems from a postinghe made on Facebook in early July. In that post, Hastings told the200,000 people who subscribe to his posts that Netflix members haveviewed more than 1 billion hours of programming on the service in June.The company did not file an official regulatory filing disclosing thatinformation.
Hastings disputes the allegation, saying that having200,000 followings on Facebook made the Facebook disclosure public. Hesays the fact regarding the 1 billion hours of viewing not only wasn'tmaterial, but had already been disclosed on a public blog.
He alsosays that while Netflix' stock rose the day he posted on Facebook, thestock's rise started before the mid-morning post as made and likelydriven by a positive Citigroup research report.
"We remain optimistic this can be cleared up quickly through the SEC's review process," Hastings wrote.