The SEC (Securities and Exchanges Commission) Agency in the United States has raised an argument on a settlement reached with Tesla and its Chief Executive Officer, Elon Musk, in 2018, which was breached twice.
In a memo sent to the automobile company in 2019 and 2020, the securities and exchange commission stated that Tesla failed to monitor the tweets from Musk based on the agreement reached after the CEO tweeted: “Winding up the line of production rapidly. And hope to produce approx. One thousand solar roofs in a week by the end of the year.”
The SEC then went to court to request that the Tesla CEO be held in contempt which obviously is a criminal offence. But Elon Musk’s legal aids argued that the post on Twitter was just a complete aspiration instead of unveiling the details of productions, sales or number of deliveries.
The settlement was revisited to create specifics on what areas need to be pre-approved by the lawyers, which include the announcement of the production figures, integration of new line of business and the financial condition of the company.
In May 2020, the SEC told the electric car company that it had breached the expected enforcement of the required controls and procedures despite the continued violations from the CEO, Elon Musk has sidelined its required duties as ordered by the court. The tweet from Elon Musk caused the stock price of Tesla ($TSLA) to rise immediately.
The legal aids of the Tesla CEO then argued that the tweet is just an expression of opinion as it has nothing to do with the agreement with the Securities and Exchanges Commission.
After then, Elon Musk has posted many tweets with statements that can move the crypto market, especially Dogecoin.
Crypto regulation, however, is not under the jurisdiction of the SEC, so those tweets from Musk is not part of the agreement either.
The agreement was reached in 2018 after Musk tweeted that he is taking Tesla private at $420. The agreement then became the first of its type that monitor and guard what a CEO can say on open global social networks or forums by requiring approval of statement before posting from lawyers.
The consequence of breaching the agreement, however, was not stated clearly outside a potential fine. But nowadays, Musk only tweeted mainly on BTC, Dogecoin and rockets as his SpaceX company is private and is outside the jurisdiction of the SEC, unlike Tesla that is a publicly traded company.