Economy

Tesla CEO Elon Musk faces contempt claim from SEC for recent tweets

Tesla CEO Elon Musk faces contempt claim from SEC for recent tweets

The US Securities and Exchange Commission (SEC) has reportedly asked a judge to hold outspoken Tesla CEO, Elon Musk, in contempt for violating his settlement with the agency with a tweet last week.

This tracks with the SEC's allegations that Musk didn't seek legal approval for the February 19 tweet, which was apparently confirmed with Tesla's legal counsel on February 22.

In another tweet about four hours later, Musk said, "Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week". In tweets after the filing, Musk criticized the SEC and said it had overlooked comments he made on the company's January 30 earnings call that Tesla may make as many as 500,000 of its Model 3 sedans this year.

"While this tweet (after market hours) and the quick correction seem innocuous, the SEC isn't likely to cut Musk any slack", said another analyst, Gene Munster from Loup Ventures.

The next day, the SEC asked the company whether the tweets had been reviewed before being published.

As part of the settlements, Musk and Tesla each agreed to pay the SEC a fine of $US20 million and to put in place a series of governance reforms and new policies about communications with shareholders. In the settlement, the agency pulled back from its original demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction many investors said would be disastrous.

"Musk has thus violated the Court's Final Judgment by engaging in the very conduct that the preapproval provision of the Final Judgment was created to prevent", wrote the SEC in its motion filed on Monday in federal court in Manhattan.

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In the same interview, Musk told journalist Lesley Stahl that not all of his tweets would be reviewed by Tesla's lawyers-only those that might move market prices.

Since agreeing to the settlement, Musk has repeatedly antagonized Wall Street's main regulator.

The SEC filed a complaint against Musk in September of 2018.

Tesla's stock slides on news that the SEC wants contempt charges filed against CEO Musk.

Only more aggravating was the requirement that Musk seek approval from a newly-created overseer charged with reviewing anything he posts to social media, including Twitter. In addition, Musk had to step down as chairman for three years and Tesla had to implement procedures to pre-approve any of Musk's tweets that could reasonably be assumed to contain material information.

Tesla's legal team realized Musk may have crossed a line with his February 19 tweet about vehicle manufacturing, according to the SEC. "Who knows?" He added: "Nobody's ideal". "I do not have respect for the SEC", he said, adding that he respected the justice system.

Musk went on to say that "I do not respect the SEC ..."