The SEC claims that Elon Musk is in "flagrant violation" of the regulation of securities fraud



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The Securities and Exchange Commission (SEC) has stated that "Elon Musk has not made any effort" in good faith "to comply with the settlement reached by both parties last year. as a result of fraud charges related to his attempt to privatize Tesla, according to a new file. . The SEC reiterated its demand Monday for Musk to be found guilty of contempt of court for the February 19 tweet that the commission described as a "flagrant violation" of the settlement.

Last week, Musk called the SEC's claim of contempt an "unconstitutional takeover attempt" and said the tweet in question contained no information that affected Tesla's stock price. Both parties and the court have until March 26 to decide to hold a hearing in order to settle their disputes. The SEC said Monday that she did not think such a hearing was necessary because the facts of the case are not disputed.

The SEC's argument is central to the argument that Musk was supposed to have his public communications on Tesla – the tweets included – pre-approved by a lawyer appointed under the settlement agreement signed last September.

On Feb. 25, the SEC asked the court to sentence Musk in defiance of the February 19 tweet. Tesla will manufacture "about 500,000" cars in 2019. The commission said it was "obviously material and inaccurate" because it went against its own predictions. for 2019, which were published in late January. However, the commission also informed Tesla that Musk's tweet had not been pre-approved by the internal board responsible for reviewing its public communications, which in its view would violate the terms of the settlement.

In its Monday report, the SEC pointed out that Tesla acknowledged, after the publication of this tweet, that the unidentified lawyer had taken an "immediate response" to collaborate with Musk to produce a correction – this which implied both that it was wrong and that Musk had not followed the rules of the settlement.

"If Musk had simply complied with the court order and the Tesla Court's senior-level disclosure policy, the designated securities lawyer would probably have caught his mistake." at first, and Musk would not have again spread inaccurate information about Tesla to 25 million people, "SEC wrote Monday.

The inclusion of this language in the settlement was intended to prevent Musk from tweeting spontaneous remarks that affected Tesla's stock price, as he did last August, when he stated that 39 hefunding obtained"To take Tesla privately at the price of $ 420. A subsequent SEC investigation revealed that Musk had only superficial talks with Saudi Arabia's sovereign wealth fund over the billions of dollars needed to achieve such a feat. It was therefore far from having obtained funding when publishing this tweet.

Musk finally abandoned the privatization attempt in late August. But the announcement temporarily increased the value of the company on the stock market and also cost thousands of dollars to traders who bet against the share price of Tesla. The SEC sued him for securities fraud and both parties quickly reached a settlement.

In addition to a $ 20-million fine and Musk's removal from his position as president of Tesla, the SEC's regulations stipulated that any public communications that could affect the company's shares must be approved. On Monday, the SEC said it was not just the February 19 tweet that Musk had not been approved – it was a tweet on two that he had been posting on Tesla since the entry into force of the regulation in mid-December, including information on the reimbursement of Tesla. policies, the pricing of the company, its projects for Gigafactory in China, etc.

"Musk's uncontrolled and misleading tweets about Tesla are behind accusations from the SEC, and the pre-approval requirement was intended to protect against any thoughtless conduct of Musk," the commission said. his answer Monday. "So it's amazing to learn that when [the request to hold Musk in contempt]Musk did not seek prior approval of just one of the many Tesla tweets it published in the months following the entry into force of the prior approval policy.

The SEC is not just taking up arms in the dark. Before asking the court to try Musk with contempt, the commission asked Tesla to explain what had happened before and after the February 19 tweet. Tesla learned from the on-site lawyer that the lawyer in charge of reviewing his communications did not pre-approve any of his tweets and was only trying to work with Musk to correct potentially important statements after the fact .

The SEC attempted to overthrow on Monday the other arguments put forward by Musk against his contempt. In its response filed last week, Musk argued that the wording of the regulation gave it the opportunity to use its own discretion as to information important to the Tesla stock price. On Monday, the SEC said Musk had never specifically identified "any language in the order or in Tesla's policy that gives him such discretion."

As to Musk's claim that the SEC's regulations could be considered a restriction of his right to free speech – a remark he made in an interview with December 60 minutes, where he also said that he "does not respect the SEC" – said the commission Monday, according to which submit written statements for prior approval does not mean that Musk does not have the right to speak.

"As long as a statement submitted to pre-approval is not false or misleading, Tesla would probably approve its publication without any restrictions on Musk," the SEC wrote. "And if the proposed statement is false or misleading, any restriction of Musk's speech would be constitutional, even if it implied state action."

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