Elon Musk tweet about Tesla violates the settlement agreement, the US regulator says to the court



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(Reuters) – A tweet about Elon Musk's production targets for Tesla Inc was "a flagrant violation" of a court order seeking pre-approval of his written submissions, a judge told US securities regulators, doubling the government's request to find the CEO of Tesla in defiance of a previous fraud settlement.

FILE PHOTO: Elon Musk, CEO of Tesla, attends the inaugural ceremony of the Tesla Shanghai Gigafactory in Shanghai, China, January 7, 2019. REUTERS / Aly Song

The Securities and Exchange Commission wrote in federal court in Manhattan that on Feb. 19, Musk had tweeted more than 24 million Twitter subscribers, claiming that the electric vehicle maker would build about 500,000 cars in 2019 containing or could have contained information for Tesla. or its shareholders.

The ongoing public battle between Tesla's chief executive officer and the major US securities regulator puts additional pressure on Musk, Tesla's public face, who is striving to make the company profitable after reducing price of his Model 3 sedan at $ 35,000.

The regulator said last month that Musk had violated the settlement of fraud charges reached in September by tweeting important information about Tesla without the prior approval of the company.

In response, Musk claimed that his "unique, immaterial" tweet was in accordance with the rules and that the SEC's pressure to find him in contempt violated his freedom of speech.

Settlement of Musk, Tesla and SEC fraud resolved a lawsuit filed by the regulator over Musk's Twitter claims that he had "obtained financing" to make Tesla private at $ 420 per month. action. The SEC called these tweets "false and misleading" and a privatization deal never materialized.

As part of the settlement, Musk resigned as president of the company. Tesla and he agreed to pay $ 20 million fine each.

It has also agreed to submit written submissions that may have a material impact on Tesla for prior approval by the company prior to publication.

"So it is amazing to learn that at the time of the filing of the pending motion, Musk had not requested the prior approval of just one of the many tweets on Tesla that had been filed. he had published in the months that followed the policy of prior authorization given by the court. entered into force, "said the SEC in Monday's filing.

Tesla gave up its plan to close all of its stores in the US and said it would raise prices for its high-end vehicles by about 3% on average. Last week, Tesla unveiled its Model Y crossover SUV, whose production is expected to begin in 2020.

Musk called the regulator "the short sellers' enrichment commission" on Twitter after the settlement, and tweeted that "something is broken by the SEC's watch" just a day after the agency has begun to comply with the order for contempt.

Legal experts have said the SEC could pursue several avenues, including a heavier fine, imposing further restrictions on Musk's activities or the dismissal of Tesla's board of directors.

Tesla released a new communication policy in December for senior executives under the settlement. He asked the Tesla General Counsel and a newly appointed securities lawyer to pre-approve any written Tesla statements that may be material.

A Disclosure Control Committee, comprised of Board members Brad Buss, Antonio Gracias and James Murdoch, was tasked with monitoring compliance with the new policy.

US SEC / Elon Musk case, US District Court, Southern District of New York, No. 1: 18-cv-8865-AJN-GWG.

Reportage by Alexandria Sage in San Francisco; Edited by Lisa Shumaker

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