Bass, Berry & Sims attorneys Jay Knight and Britt Latham provided insight for CNBC articles about Tesla CEO Elon Musk’s latest social media activity that the Securities and Exchange Commission (SEC) claims violates the agency’s September 29 settlement with him, which required the CEO to vet any public comments, including social media communications that could affect investor decisions. The complaint from the SEC stems from a tweet Elon Musk sent out in late February about Tesla’s production forecasts, and then a subsequent tweet correcting his original post.
According to Jay, Elon Musk may have simply made a mistake, but the SEC has to enforce the settlement both to keep him in line and to send a message to other public company CEOs that disclosure rules still apply, even in a world where the public is increasingly accustomed to social media and the rapid, direct communication enabled by the internet. “In the world of public companies, there are a lot of mini Elon Musks,” Jay said, and there is a tension between getting information out to investors as soon as possible and the possibility that something could be incorrect or misleading.
“While it is difficult for a CEO to write a press release and release it on a wire service, it is really easy to pull out a phone and start tweeting,” Jay explained.
However, the Commission’s latest action could also be part of a larger strategy with Tesla and its CEO, said Britt. “They are building their case. If they get a violation here, they could get the court to issue an order that puts some more teeth into the consequences of the next violation. Then at some point, given how unpredictable Mr. Musk is, the agency may assume he will hang himself and give them the opportunity to really take some more serious action.”
The full articles are available in the links below:
- “Elon Musk’s Lawyers Fight Back, Slamming SEC for ‘Unprecedented Overreach’ in Contempt Bid,” CNBC (March 12, 2019)
- “Tesla’s Elon Musk Could Be Suspended as CEO in Latest SEC Scuffle, Securities Lawyers Say,” CNBC (March 7, 2019)
Britt’s quote was also cited in the article, “Musk Accuses SEC of Overreach, First Amendment Violation,” published by UPI on March 12, 2019.