Legal Guidelines For CEOs On Social Media – Avoid The Netflix Issue

by Gray Reed & McGraw

[author: Travis Crabtree]

In July, Netflix CEO Reed Hastings posted on Facebook that viewing on his company’s site “exceeded 1 billion hours” of videos in June.   The stock rose 6.2% on the day of the post.  Last week, the SEC sent Netflix notice it may investigate.  You can read the Washington Post story here

Reg FD, or Fair Disclosure, is the issue.  In a nutshell, companies must make public disclosures of material information to the general public and cannot selectively provide information to favored shareholders or investors.  That’s loaded for two reasons – “public disclosure” and “material.”

Public Disclosure

Usually companies provide press releases to recognized wires or news services and then make public filings with the SEC to make public disclosures.  The reg also allows for “any other non-exclusionary method.”  

This time, the CEO sent the information to 200,000 of his fans on Facebook–many of whom were part of the business media who would have received the press release.  The CEO also posted on his blog earlier in June that Netflix was almost at 1 billion hours per month.  Neither were followed with press releases or SEC filings.

Reg FD was passed in 2000 — before Facebook and Twitter.  It wasn’t until 2008 that the SEC formally approved making public disclosures via company websites under certain circumstances.  Will this force the SEC to accept other more popular ways and current ways of disseminating information?  Perhaps every CEO of publicly traded company should be required to follow an official SEC account so all of their posts or tweets are re-issued and available in one spot. 


Even if the post was not considered a public disclosure, there is still a question as to whether it was material.   As you can probably guess, “material” is not expressly defined, but the SEC has provided some guidelines.  It may be material if there is a “substantial likelihood that a reasonable shareholder would consider it important” such as earnings, M&A issues, new products, changes in management or serious defaults. 

Although Netflix says the information was not material, the stock did have its biggest one day rise in six weeks. 

So do we ban posts and tweets from the corner office?

The Wall Street Journal ran a story in September about the risk of CEOs being on Twitter. If you can’t stop the CEO, here are some tips to minimize risks for upper level management involved in social media.

 1.   Have a plan.  Review your current process you use to disseminate information to investors analysts and other in light of Reg FD.  After you spot the risks, prepare a policy outlining the consequences and share it with executives, investor relations and anyone else who is responsible for talking to investors.  Use the policy to do periodic Reg FD planning and designate a primary compliance person to review statements before they go out if there is a question.

2.   Have a specific plan regarding earnings or other major announcements and collect all public statements not including social media such as SEC filings, press conferences and and conference call transcripts. 

3.   Track the social media accounts of your major executives.  Unless you want to pre-approve the CEO’s message about the company softball game in advance, at least allow your primary compliance person to track all of the various social media accounts to take swift action.

4.  Plan for the unintentional selective disclosure.  That is a term of art under the Regs and requires corrective action beyond the scope of this post.  Assume it is going to happen and be prepared for it with IR, management and your legal team.

5.  When in doubt, bring a witness.  If you are hosting a conference or call and you are concerned, bring someone along whose sole job is to recognize and note any unintentional disclosures.

6.   Get insurance for your executives and the company.

Will the SEC come around and allow for Twitter and Facebook to be used for public disclosures?  If the speed of their implementation of crowd funding is any indication, it may be some time before there is some brightline guidance.  Until then, we have to watch what happens to others.  Tesla could be next — on December 4, the CEO tweeted “Am happy to report that Tesla was narrowly cash flow positive last week” to his almost 113,000 followers.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gray Reed & McGraw | Attorney Advertising

Written by:

Gray Reed & McGraw

Gray Reed & McGraw on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.