SEC Slams Musk For Failing to Adhere To Tweet Approval Rule

Mae Love
March 19, 2019

As part of a settlement with the Securities and Exchange Commission (SEC) over that notorious "funding secured" tweet, Musk agreed to have certain tweets pre-approved by Tesla.

The agency on Monday reiterated its request that the judge find Musk in contempt of court, saying it has learned that Tesla's chief executive "had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered pre-approval policy went into effect".

According to a Fox News report, the SEC thinks that "Musk's argument that tweeting about auto production forecasts on February 19 wasn't material information is almost ridiculous". It called for Tesla's general counsel and a newly designated in-house securities law attorney to pre-approve any written statements about Tesla that could be material.

The SEC, citing Musk's own words, accuses him of not doing that and says "there was never any good faith effort to comply with the Court's order".

But in new court documents, the SEC said that Mr Musk's defence was flawed.

On Monday, SEC lawyers responded by calling his continued defiance of the agreement "stunning". SEC v Elon Musk, U.S. District Court, Southern District of New York, No. 1:18-cv-8865-AJN-GWG.

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In the document, the SEC called it "frankly hard to follow Musk's tortured analysis" arguing that he did not need to seek pre-clearance on Tesla tweets from company staff.

It has learned since the publishing of the controversial February tweet that not only had Mr Musk not sought approval for that specific tweet - he has not sought approval for any of his social media posts since the settlement.

The lawyer quickly realized it and arranged a meeting with Musk to write a correction.

News organization Reuters consulted with legal experts who stated that the SEC still has multiple avenues in which they can pursue Musk, such as: "a higher fine, imposing further restrictions on Musk's activities or removing him from Tesla's board or helm". The company would make vehicles at a rate of 500,000 per year, but it wouldn't produce a half-million in 2019. Musk argued that he had used his own judgment to determine that his tweets did not contain material information-and that therefore the tweets didn't require review by Tesla's legal department.

The tweet was posted and corrected after US markets had closed, but experts say regulators don't care much about that because stocks are traded almost around the clock.

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