Abu Dhabi, UAEWednesday 21 August 2019

SEC 'stunned' Elon Musk never sought pre-approval for tweets despite court order

US securities regulator may impose additional penalties against the chief executive

Elon Musk at the unveiling of the Tesla Model Y, a cheaper electric SUV meant to kickstart the car maker's profits. Bloomberg
Elon Musk at the unveiling of the Tesla Model Y, a cheaper electric SUV meant to kickstart the car maker's profits. Bloomberg

A new court filing states Elon Musk did not seek pre-approval for any of his tweets as required by a deal struck last October to rein in the Tesla founder, following social media posts by him that were determined illegal by the US securities regulator.

The US Securities and Exchange Commission requested that a judge find Mr Musk in contempt of court and sought a new trial, as it learnt the 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”.

The SEC asked Tesla more than two weeks ago whether any of Mr Musk's tweets had been pre-approved since the policy was adopted, according to the filing in federal court in Manhattan. Tesla responded: "No."

In its complaint, reviewed by The National, the SEC singled out a February 19 tweet that Mr Musk sent to his more than 24 million Twitter followers, claiming the electric vehicle maker would build around 500,000 cars in 2019.

The regulator said the tweet was in violation of a fraud settlement that mandated designating an attorney to oversee Mr Musk’s tweets. That agreement also fined Tesla $40 million, called for the appointment of two independent board directors and Mr Musk to step down as chairman.

The SEC said it is “stunning” that Mr Musk did not seek pre-approval of any of his tweets about Tesla in the months since he was ordered by a judge to do so.

In addition to being in contempt of court, the SEC emphasised that Tesla production forecasts have long been significant to market participants who follow the company. I

John Hueston, the lawyer representing Mr Musk, requested permission from the presiding judge to file a response by March 22. He said the response would include documents reflecting the negotiation history between Mr Musk and the SEC, which Mr Heuston said would undermine the regulator’s new assertions, Bloomberg reported.

If the presiding judge finds Mr Musk in contempt of court, new fines may be slapped, additional oversight on Mr Musk’s social media use may be imposed and he may be suspended, or barred from running Tesla or any other public company.

Mr Musk has been wrestling his company to profitability.

Tesla back-pedalled on a plan to close all its US stores and said it will instead hike prices on its high-end vehicles by about 3 per cent on average. Last week, Tesla announced its new Model Y crossover SUV, which starts at $39,000 and will head into production in 2020.

Tesla's share price closed 2.16 per cent down on Monday.

Updated: March 19, 2019 02:26 PM

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