U.S. securities regulators have pulled their punches in dealings with the Tesla CEO
U.S. securities regulators have pulled their punches in dealings with Elon Musk largely because an April 2019 court hearing on a statement he made about Tesla on Twitter didn’t go their way, according to four sources with knowledge of the matter.
Interviews with individuals familiar with the situation – as well as a review of court documents, SEC and Tesla emails obtained by the media through a public records request – showed that in the wake of Nathan’s comments, SEC officials opted to urge Musk to comply with the agreement, rather than pursuing enforcement through the courts.
The sources said they are not familiar with the current thinking of the SEC, which has been under new leadership since President Joe Biden took office in January 2021. Under new Chair, Gary Gensler, the agency has pledged to crack down on repeated misconduct and push for tougher penalties. The settlement required Tesla to establish a process for overseeing all of Musk’s communications about the company, including hiring or designating an “experienced securities lawyer” to vet social media posts. Musk also agreed that he would certify in writing that he had complied, and provide proof; and to step down as Tesla chair while remaining CEO. No end-date was set for the arrangement.
In April 2019 they went to the New York court to argue that Musk should be held in contempt of court – a serious charge that can result in fines or jail. The SEC wanted the court to order Musk to report monthly to the agency on his compliance and enforce escalating fines for violations, its lawyer told the judge at the hearing.
Judge Nathan challenged what she described as the settlement’s “soft” standard for assessing when a tweet was material, the court transcript shows; she also agreed with Musk’s lawyer that the SEC should have tried to resolve the issue out of court, saying, “This screams of working it out.”
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