US regulators are seeking contempt of court charges against Elon Musk over fears his use of Twitter has potentially misled investors in Tesla.
The Securities and Exchange Commission (SEC), the watchdog that upholds US stock market rules, went to court in New York to argue the entrepreneur had violated a $40m settlement they had reached over tweets that had the potential to impact Tesla’s share price.
The regulator first took issue with Mr Musk back in August last year when he tweeted he had secured financing for a potential buyout of the electric car company.
He later had to agree as part of the settlement that any tweet he produced that had the potential to influence investors must be pre-approved by a company lawyer.
It emerged on Monday night that the SEC was taking a fresh interest in his social media posts when it argued at a Federal court in New York that Mr Musk had broken his side of the settlement.
It alleged a tweet he sent a week ago predicting that Tesla would make about 500,000 cars this year was a violation.
Mr Musk had written: “Tesla made 0 cars in 2011, but will make around 500k in 2019.”
Just hours after he had posted the tweet, Mr Musk issued a clarification saying he meant that Tesla had started to manufacture cars at a weekly pace that would translate into 500,000 cars during a year-long period, but not necessarily for the calendar year 2019.
The SEC said Mr Musk acknowledged he didn’t get company approval for the initial post but did not think it needed clearance because he was basing it on information that had been disclosed in late January.
Tesla shares were 5% down in after-hours trading in New York as news of the contempt filing emerged.
If a judge was to rubber stamp the accusation, Mr Musk could face a fine or jail time.
Tesla was yet to comment publicly but is reported to argue that Tesla remains in compliance with the terms of the SEC settlement.
Carl Tobias, a law professor at the University of Richmond, told the AP news agency that the latest spat had renewed the debate on whether Mr Musk was a responsible captain for a major listed company.
“He is looking like a repeat offender and a bad actor.
“The SEC is taking action because it has a responsibility to protect the interests of consumers, investors and the public,” he said.
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