Thanks to a seemingly innocuous Facebook posting by its Chief Executive Officer, Netflix is facing the prospect of the Securities and Exchange Commission bringing a civil action against the company and the CEO.
In July, the CEO cheerfully revealed to 200,000 Facebook followers that Netflix subscribers had watched a billion hours of online videos the previous month. Despite the seemingly trivial nature of this posting, the SEC has issued a Wells Notice to Netflix and its CEO, indicating that the agency is contemplating civil action for possible violations of Reg FD about disclosures public companies make to invetsors.
While some say the SEC is overreaching, the incident is a stark reminder that Broker-Dealers and Registered Investment Advisors can face regulatory problems if associated persons misuse social media in connection with their jobs, and that registered representatives as well as IA reps need to know the current state of the law in this area.
While social media sites like Facebook, LinkedIn, and Twitter hold great potential for marketing financial services, FINRA constraints mean such sites pose some regulatory risk.
Supervision is key, and firms’ legal and compliance departments need to stay current with both changes in technology and the law. Securities firms examine their social media policies, oversight and training, and implement protocols for prepublication review of social media postings by all personnel.
As we have learned, even seemingly innocuous posts on Facebook can trigger unintentional regulatory scrutiny that cause needless distraction from running your business.