Securities lawyers, some of whom worked at the SEC, said Elon Musk's tweets about Tesla production look like a clear violation of his agreement with the agency, and that he could face a suspension or further consequences.
Tesla CEO Elon Musk is facing pretty significant fines and a possible suspension as CEO for recent activity on Twitter that federal regulators said violated his Sept. 29 settlement with the Securities and Exchange Commission, securities lawyers say.
Musk is still considered a first-time offender, in that he hasn't been convicted of a crime like Martha Stewart in 2004 or Elizabeth Holmes at Theranos and he isn't quite yet a habitual or serial offender, said Elliot Lutzker, a former attorney in the SEC's enforcement division. So it is unlikely the agency would seek an outright ban.
Musk's initial settlement with the SEC required Tesla to develop a process for vetting any communication, including tweets, Musk makes with the public. That was supposed to prevent the sort of misleading tweets that led to the SEC's first dispute with Tesla, after Musk tweeted in mid-2018 that he had already secured the funding to take Tesla private at $420 a share. The tweet turned out to be false.
The Supreme Court has defined material information very simply, Lutzker said, as anything a reasonable investor would want to know in deciding whether to buy or sell a stock. The settlement requires vetting for any any projections about Tesla's business, which would include production forecasts. "While it is difficult for a CEO to write a press release and release it on a wire service, it is really easy to pull out a phone and start tweeting," he said.
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