Elon Musk at the SEC – This is not what we agreed



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Published on March 12, 2019 | by Maarten Vinkhuyzen

March 12, 2019 by Maarten Vinkhuyzen



The SEC is trying to get Elon Musk convicted by the court. The SEC claims that Musk violated the sales contract they reached after the famous "secure financing" tweet, a treaty that was accepted by the court as its final judgment and therefore has the power to make an order. Judiciary for Elon Musk and Tesla.

This is a lot of legaleseargument in the first paragraph of an article. For us, simple minded lawyers, the important starting point is this: there is a court order that Musk and Tesla must obey.

The SEC says that Musk did not do it. Musk (and his lawyers) say he's done it. In other words, we have a simple case of "he said," she said. But when it comes to lawyers, it is never simple. Look at the 33 pages the lawyers needed to say, "Musk obeyed."

In the court order, a number of provisions related to the independent directors, the presidency, the fines, the supervision and the communications. This complaint from the SEC concerns the provisions relating to communications and surveillance. In simple terms, these provisions state that: Tesla must have a policy and procedures regarding the disclosure of material information and Musk must abide by them.

Tesla did create policies and procedures, which is not disputed. According to Tesla and Musk, Musk is consistent with them. Normally this case would be "classified". The SEC, in its unlimited wisdom, however, believes that Musk has not complied with the policy and procedures.

Rewind: what happened? On 19 February 2019, at 7:15 pm, Elon Musk tweeted something immaterial (immaterial = it does not really matter). The fact that it is immaterial is not disputed by the SEC! Do not discuss this in the comments.

The tweet was corrected or clarified 4 hours later. For some reason, a member of the SEC thought that this could indicate that Musk was not complying with the court order. The SEC asked Tesla what happened, Tesla said. Still, the SEC had many more questions (a Sunday) and did not wait for the answers (the following Monday), instead filing a complaint that Musk allegedly violated the court's order and should be held at home. contempt.

What is important is that the court order and Tesla's policy are about Equipment information. In order for the information to be material, there must be "a substantial likelihood that the disclosure … would have been considered by the reasonable investor as having materially altered all the information made available".

Again, the SEC does not dispute the fact that the tweet was unimportant. It is based on not asking and receiving prior permission from the tweet. But for tweets and intangible communications, prior authorization is not necessary. (Are you still dizzy?)

Ah, says the SEC, but to determine if this is actually immaterial, you must obtain prior permission. It makes sense, until you start thinking. It's about all written communications. In reality, Musk needs prior authorization for any written communication, even internally. Musk can not write anything about Tesla without prior permission. And if he wants to repeat himself after more than two days, he still needs an authorization. This is the consequence of the SEC's interpretation.

After many legal arguments, Musk's lawyers say: "Musk never consented and would not consent to such a gag order, and Tesla did not apply such a policy."

What is essential. The court order is based on an agreement between two parties, the SEC and Tesla / Musk. You can not unilaterally change such an agreement, as the SEC is trying to do here. And even if it had been in order, it would not have been valid because violates the American constitution.

That leaves the question, what was the opinion of the SEC when she rushed to file the complaint. He did not even wait for answers to his own questions. It is very difficult to prove that there is "clear and convincing evidence of the violation of an unambiguous court decision", particularly when the people who wrote Tesla's "Senior Management Communication Policy" and have been accused of applying it stated that the tweets were: not in violation of the policy.

In normal legal proceedings, that would be the end. But in proceedings where the SEC is a party, the courts operate differently. The defendant is no longer presumed innocent until guilt has been proven beyond a reasonable doubt. Some people think that politics has become in case of doubt, the SEC is right.

If the result of this lawsuit is that there is a significant difference of opinion, the problem is huge. The basis of each argument is that "the clear and unambiguous terms of the Court's order" are indeed clear and unambiguous. In Tesla's rebuttal of the SEC's arguments, the SEC is accused of changing the meaning of the settlement.

If the judge sided with the SEC and declares that the SEC's interpretation is correct, the argument "Musk never consented to" rejects the entire plea case in justice. I can not wait for the verdict.

Keywords: Elon Musk, SEC, Tesla


About the author

Maarten Vinkhuyzen Old grumpy man. The best thing that I have done in my life has been raising two children. Only finished primary education, but when you do not go to school, you have plenty of time to read. I went from accounting to software development and my career as a system integrator and architect ended. My 2007 boss bought two Lotus Elise electric cars to show decision makers the future direction of energy and transportation. And since then I have been trying to replace my diesel cars with electric vehicles.



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