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SEC rebukes Elon Musk, says his tweet about Tesla vehicle production was a 'blatant violation' of court settlement

Bryan Logan , Business Insider US
 Mar 20, 2019, 01:40 PM
SpaceX founder Elon Musk gestures during a NASA press briefing on March 2, 2019.
  • The Securities and Exchange Commission says a tweet Elon Musk sent in February claiming that Tesla would produce 500,000 vehicles in 2019 was a "blatant violation" of a court settlement between himself, Tesla, and the agency.
  • Among other things, that settlement requires Tesla to appoint a "Twitter czar" who vets Musk's tweets for information material to Tesla before publishing.
  • 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".
  • Musk's lawyers criticised the SEC's latest filing on Monday, accusing the agency of making new allegations against the Tesla CEO.

The Securities and Exchange Commission, in a court filing on Monday, said a tweet Elon Musk published in February was a "blatant violation" of a R578 million court settlement that requires Tesla to appoint a "Twitter czar" who would vet his tweets for information material to the company before publishing.

The SEC filed a contempt-of-court claim against Musk over a February 19 tweet in which Musk said Tesla would produce 500,000 vehicles in 2019. Musk corrected the tweet about Tesla vehicle production hours after he sent it.

The Twitter czar was supposed to prevent the Tesla CEO from tweeting information about the electric car-maker that could unduly rattle the market. That order stems from a settlement reached between the SEC and Tesla in September over Musk's now-infamous "funding secured" tweet last year in which he said he was prepared to take the company private at R6,000 per share. Both Tesla and Musk were ordered to pay R289 million each in restitution.

Tesla implemented a new policy governing communications among its senior executives as part of the settlement.

The SEC accuses Musk of failing to have his tweets vetted and, instead, "unilaterally" deciding what is material information.

"The preapproval requirement was designed to protect against reckless conduct by Musk going forward," the SEC said in its filing on Monday. "It is therefore stunning to learn that, at the time of filing of the instant motion, Musk 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."

It continues: "Musk's shifting justifications suggest that there was never any good faith effort to comply with the Court's order and the Tesla Policy. Rather, Musk has simply elected to ignore them."

Musk's lawyers responded to the SEC's filing late Monday night, accusing the agency of making new allegations against the Tesla CEO, and asking the court give Musk time to respond.

This is the latest development in an ongoing dispute between Musk and the SEC. The Tesla CEO has not been coy about his disdain for the regulatory agency that he previously called the "Shortseller Enrichment Commission."

Legal experts cited by Reuters say the SEC still has a number of remedies it can pursue if the Musk settlement goes south. Those could include higher fines against Musk and tighter restrictions on his activities within the company.

Read the SEC filing in its entirety here:

And read the response from Musk's attorneys here:



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