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Date TimeNovember 02, 2018
VoiceCould Elon Musk's tweets put him on thin ice with the SEC -- again?

The Tesla (TSLA - Get Report) CEO is as active as ever on Twitter nowadays, despite a recent penalty from the SEC that stemmed from the chief's questionable use of his 23-million-follower Twitter account. In September, the SEC sued Musk for allegedly lying to investors in saying that he had "funding secured" for a go-private deal that never materialized.
Musk reached a settlement with the agency requiring that he pay $20 million in fines and step down as chairman of Tesla for three years. But it also mandated that Tesla institute controls by to oversee Musk's communications on Twitter, described by Steven Peikin of the SEC's enforcement division as "an obligation to oversee Musk's communications with investors" in a statement.
But it isn't clear how exactly that requirement is being enforced at Tesla. Since the settlement was reached several weeks ago, Musk has continued to post tweets that have raised eyebrows, including one that included a thinly veiled dig at the agency referring to it as the "Shortseller Enrichment Commission." This week, the odd activity continued, including one tweet saying that the SEC penalty was "worth it" as well as another referring to the removal of his titles from Tesla's website.
There's nothing necessarily criminal about a CEO mocking authorities on Twitter -- or posting weird tweets for that matter -- but it's not likely to do Musk any favors according to David Lavan, a former SEC special counsel and partner at Dinsmore & Shohl LLP.
"It's certainly not buying him any goodwill," Lavan said.
In an interview with Recode Media this week, Musk was asked if the SEC settlement meant that he would be changing his Twitter behavior. Musk replied: "Not really. I think it's mostly just if it's something that might cause a substantial movement in the stock during trading hours. That's about it."
According to Lavan, under the terms of the settlement, Tesla would be well-advised to install someone from its legal department to review Musk's tweets, although the nature of the medium poses some challenges. "If the process takes more than an hour it's probably not going to work, just because of what Twitter is -- you can't write a tweet and then pass it up the chain," Lavan said.
That's one of the reasons why relying on social media to post company disclosures in considered a horrible idea by many experts. It also could pose challenges in enforcing SEC rules, noted Katalin Haynes, professor of management at University of Delaware.
"Too often when rules are in place, the SEC expects everyone to follow the rules, but when they do not, consequences are negligible," said Haynes.
When it comes to monitoring Musk's Twitter for accuracy, another variable may be determining exactly what "accurate" means in the context of his account, which mixes business with his personal celebrity to unpredictable effect.
While it was Musk's "funding secured" tweet that led to the SEC's lawsuit, the CEO also has a long history of unrestrained tweeting on everything that can produce wild fluctuations in the stock price --- for better or for worse. In the past year or so, Musk's Twitter account has mixed everything from repeated insults towards a British cave diver to making coy references to Tesla product plans, such as one purporting a "top secret masterplan" that sent the stock up 4.5%.
"If it's promotional, and it's true, then I think that's fine. A tougher call is when you get to something that's more aspirational than actual," Lavan added.
Asked for comment on who is monitoring Musk's tweets at Tesla, a spokesperson replied: "We don't have anything to share on this at the moment."
Tesla shares were roughly flat on Friday and are up about 10.5% this year.

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