The SEC Is Suing Elon Musk. It's All in the Timing

With the timepiece moving retired connected the Biden administration, the US Securities and Exchange Commission has sued Elon Musk successful national court. The statute astatine manus is comparatively straightforward. The timing of the ailment is much complicated.

The SEC’s ailment centers connected Musk’s acquisition of Twitter banal successful aboriginal 2022. According to the complaint, Musk failed to notify the bureau that helium had acquired much than 5 percent of communal shares successful the institution wrong 10 calendar days. If true, that hold would interruption national information laws. “As a result, Musk was capable to proceed purchasing shares astatine artificially debased prices,” the SEC alleges, “allowing him to underpay by astatine slightest $150 cardinal for shares helium purchased aft his beneficial ownership study was due.” The SEC has asked for a assemblage trial.

This should each beryllium beauteous simple. “It looks similar a straightforward lawsuit astir a wide usurpation of a well-established SEC rule,” claims James Park, a prof astatine UCLA School of Law who focuses connected securities regularisation and firm law. You either record your paperwork wrong 10 days oregon you don’t; the SEC claims that Musk didn’t. He acquired capable shares to transverse that threshold by March 14 of that year, the bureau alleges, and didn’t publically disclose his ownership until April 4. (The SEC alleges that Musk was technically 11 days late, arsenic helium continued to get shares done March 24.)

And yet it took astir 3 years for the SEC to bring a case. “The question is, wherefore are they doing it now,” says David Rosenfeld, erstwhile co-head of the SEC’s New York enforcement bureau and presently a prof astatine Northern Illinois University College of Law. “The lone plausible reply is they privation to get it done earlier the medication changes.” Rosenfeld notes that helium did not reappraisal the SEC ailment successful depth.

That enforcement subdivision changeover, which happens successful little than a week, creates a much favorable regulatory situation for Musk, who donated hundreds of millions of dollars to PACs supporting Donald Trump’s statesmanlike run and has reportedly been a adjacent advisor to the President-elect during the modulation period. Current SEC seat Gary Gensler volition apt beryllium replaced by Trump’s nominee, Paul Atkins, who is wide viewed arsenic supporting a lighter regulatory touch.

Musk’s lawyer, Alex Spiro, says helium believes the ailment is simply a parting shot. “As the SEC retreats and leaves office, the SEC’s multi-year run of harassment against Mr. Musk culminated successful the filing of a single-count ticky-tack ailment against Mr. Musk,” helium wrote successful an email.

While the filing comes conscionable earlier Trump’s inauguration, the probe that led to this ailment has been years successful the making. The bureau had to subpoena Musk successful May of 2023 to get his grounds successful the investigation, and has said that Musk canceled connected them 2 days earlier his scheduled grounds that September. A national tribunal upheld an earlier determination to compel him to attest successful May of 2024; SEC lawyers flew retired to interrogation him connected September 10, but helium stood them up erstwhile again to be a SpaceX launch.