The SEC-Netflix case shows how regulations have to quickly adapt to the widespread use of social media
Once again, social media has shown the dire need for conventional rules and regulations to change in accordance with the widespread adoption of social networks. In what looks like a ludicrous move, the US Securities and Exchange Commission has issued a Wells notice?a notification from a securities regulator that it intends to recommend enforcement action and affords the respondent an opportunity to explain why such an action is not appropriate?to Netflix and its CEO Reed Hastings over a Facebook post the latter made in June. In the post, Hastings said that ?Netflix monthly viewing exceeded 1 billion hours for the first time ever in June.? The SEC reportedly believes that the ?1 billion hour? figure is material information, which should have been made public in a press release or regulatory filing. This is where the interaction between conventional rules and new-age communication tools falls down. Yes, Netflix as a listed company has to make public any information that concerns its investors and their investments. But, as Hastings himself argued, surely an online post accessible to more than 200,000 subscribers should come under the realm of ?public?. And the thing with social media is that the reach of a post in never restricted to just the number of subscribers. Every time a subscriber ?likes? or ?shares? a status on Facebook, the number of people able to view the status increases exponentially. The total number of people who would have viewed the status would in reality have been far in excess of the 200,000 odd subscribers?not to mention the fact that a large number of Hastings? subscribers are journalists.
The problem lies in the fact that the SEC?s rules do not at present take into account social media as a legitimate means of communication for companies. This has to change. Often, companies like Google and even Facebook post company updates as status messages or blog posts. In practice, their reach is far in excess of the number of people who invest in these companies.
