Elon Musk has insulted and denigrated the Securities and Exchange Commission and even shown complete disrespect for Wall Street’s top cop.
Musk called the SEC “bastards”, at a recent conference. He tweeted a vulgar innuendo in 2020. In a 2018 interview, he stated that he did not respect the SEC. Musk submitted required paperwork 11 days late after he had acquired a large stake in Twitter.
“You know what Elon Musk basically means? Come at me. Christine Chung, a professor from Albany Law School, says, “I dare you.” She was once a lawyer in Division of Enforcement of the SEC.
Musk continues to slander the SEC despite the fact that the agency has taken multiple action against him. These include fining him millions and accusing him for securities fraud. The SEC recently asked Musk to explain his public comments about Twitter and why he didn’t file a mandatory disclosure in time.
This is reviving the debate over whether or not the SEC has enough teeth to control wealthy and powerful executives such as Musk.
Musk’s behavior in recent times has been a source of concern. Joseph Grundfest, a former SEC Commissioner, says it appears that Musk violated the law by late filing. Musk took 10 days to notify the SEC if he or she has more than a 5 percent stake in a public company.
Grundfest, now a Stanford Law School professor, said that “as a practical matter it seems to me this is about the closest to a slam dunk case as I’m going to find.” “The SEC’s junior lawyer should be able write up a very strong complaint.”
Grundfest doesn’t believe that Musk would be charged with a disclosure violation. This offense is usually punished with a fine of around $100,000.
Grundfest says, “To a guy such as Elon Musk that’s pocket grease.” That’s just chump change. It’s bupkis. It’s a petty money item.
According to Bloomberg Billionaires Index, Musk is the world’s richest person with a net worth of $227 million.
Grundfest says, “It’s really going to not make a difference.” It won’t change your behavior. He’ll chuckle.”
Musk joked at the SEC during a 60 Minutes interview. Lesley Stahl asked Musk about his decision to settle with them over a tweet.
Musk stated in an interview that “I want to make it clear.” Musk said, “I don’t respect the SEC. They are not my friends.”
He was sued by the SEC for “misleading tweets” which “led to significant disruption in market conditions.” Musk famously tweeted that he was considering taking Tesla private for $420. Musk claimed that he had the funding to do this. He claimed he did not.
Am looking at taking Tesla private for $420 Funding secured.
Musk and Tesla both agreed to pay $20 millions each. The electric-carmaker also agreed to “put in additional controls and procedures for Musk’s communications,” including tweets, according an SEC news release.
This kind of muzzling, however, has not worked. Musk continues to make public attacks on the SEC and recently asked for a court’s rejection of his settlement. A federal judge rejected Musk’s April request.
Ex-SEC officials wondered if the agency was equipped to enforce a world in which corporations are worth trillions of US dollars, the richest individuals are worth hundreds of billions, and stock market movements are driven by tweets.
Nearly a century ago, Congress established the Securities and Exchange Commission after many Americans lost their money during the 1929 stock market crash. According to its website, the primary purpose of the SEC is to “protect investors.”
It was intended to be a strong organization aEUR” both a regulator as well as a law enforcement agency. Its options are limited in the face market manipulation and other malfeasance. It cannot, for example, bring criminal charges.
Chung suggests that it is worth asking the question: Does the SEC carry out its mission fairly and equally, no matter how rich or powerful you may be?
Many Americans were puzzled by the lack of prosecutions for chief executives in the wake the 2008-2009 financial crises. Even though financial institutions were required to pay civil penalties for their actions, these penalties were pocket money for banks with trillions in assets.
Chung says that people who feel the markets are rigged or unfair and that their wealth and power determine what happens, may be less inclined to believe what the market has to say about the value companies such as Twitter.
The SEC is vastly behind the organizations and executives it regulates when it comes to resource allocation. This is why Musk’s net worth exceeds 100 times the annual budget of the SEC.
Chung says that the SEC drives their Model T while everyone else is driving their sports cars.
Even if Musk is not charged by the SEC, the Tesla CEO pushes boundaries and tests norms in ways that we haven’t seen before, according Marc Fagel who used to manage the San Francisco Regional Office of the SEC.
He mentions a recent Twitter back-and forth between Musk and Parag Agrawal, the CEO of Twitter.
Musk posted a poop emoticon to end what started as a serious exchange about the company’s user count.
dY'(c)
Fagel states that the securities laws have no tools to punish fraud. “But if someone sends a poop emoticon and investors decide they want to buy or sell stock on it, the securities laws don’t really protect them at that moment.”
Although that tweet did not cause a significant move in Twitter stock prices, several Musk tweets have. One in which he stated that his contract for the company was “temporarily suspended”
Fagel believes Musk has figured something out. This new world allows you to manipulate markets using the social media platform Musk is trying to purchase, but it doesn’t rise to the level fraud.
While this can be a problem for investors, it is not allowed by law.
