In 2020, the US Securities and Exchange Commission (SEC) reprimanded Tesla and CEO Elon Musk for allegedly violating the terms of a settlement agreed between the two parties in 2018.
According to a report by the Wall Street Journal, the SEC told off Tesla for Musk’s ‘use of Twitter’. The agency said Musk’s tweets have violated the terms of the settlement agreement that required Musk to get his tweets preapproved by company lawyers.
In 2018, SEC and Tesla had settled an enforcement action alleging that Musk had committed fraud by tweeting about a potential buyout of his company. Musk and Tesla had paid $20 million each to settle that case. At the same time, they had agreed to have his tweets overseen by Tesla lawyers.
Reportedly, SEC had corresponded with Tesla in 2019-20, pointing to his unapproved tweets. SEC was referring to his tweets on Tesla’s solar roof production and overpriced stock. The latter tweet had cost over $13 billion to the electric car company. Per the regulator, these tweets were not subjected to pre-approval, as per the agreement.
While the SEC sent correspondences to the firm, it did not take any action to enforce the agreement.
The feud between SEC and Musk stems from an SEC investigation in 2018. SEC had alleged that Musk misled the investors by tweeting about Tesla’s potential buyout.
To settle this case, Musk and Tesla had signed an agreement with the SEC, that required the former to pay a fine of $20 million each. It also required Musk to step down as the Chairman of the company and add two independent directors.
The terms of settlement went on to demand that Tesla put a new committee in place to oversee his tweets. The committee, comprising of independent directors, was to monitor Tesla’s effort of ‘twitter-sitting’ Musk.
Days after settling the charge with the regulator, Musk had again taken to Twitter to openly mock SEC.
Soon after, SEC observed it was difficult to get the social media policy enforced at Tesla. It, therefore, asked a federal judge to hold Musk in contempt.
The judge, however, signalled that she wanted the two sides to settle the dispute and so the two sides agreed to modify the policy. The modified agreement included a list of financial milestones Musk could not tweet about without pre-approval.
Musk needs pre-approval for tweeting about topics such as Tesla’s sales figures, new product lines, production estimates, among others things.
(Edited by : Ajay Vaishnav)
First Published: IST