The SEC is suing Elon Musk. It’s All in Timing

As the clock is running out on the Biden administration, the US Securities and Exchange Commission has sued Elon Musk in federal court. The current law is relatively simple. The timing of the complaint is more complicated.

The SEC’s complaint is related to Musk’s purchase of Twitter shares in early 2022. According to the complaint, Musk failed to notify the agency within 10 calendar days of acquiring more than 5 percent of the company’s common stock. If true, the delay would violate federal security laws. “As a result, Musk was able to continue buying shares at artificially low prices,” the SEC said claims“permits him to pay at least $150 million less for the shares he buys after the beneficial ownership report is due.” The SEC requested a jury trial.

This should all be pretty simple. “This looks like a simple case of a clear violation of a well-established SEC rule,” said James Park, a UCLA School of Law professor who focuses on securities regulation and corporate law. Either you submit your documents within 10 days or you don’t; The SEC claims that Musk did not. The agency claims it acquired enough shares to exceed that limit by March 14 of that year and did not disclose its ownership until April 4. (SEC claims Musk is technically 11 days late because he continues to acquire shares. March 24.)

Still, it took nearly three years for the SEC to file suit. “The question is, why are they doing it now,” says David Rosenfeld, former head of the SEC’s New York enforcement office and now a professor at Northern Illinois University College of Law. “The only plausible answer is that they want to do it without a change of administration.” Rosenfeld notes that he has not reviewed the SEC complaint in depth.

The executive shakeup, which took place in less than a week, creates a more favorable regulatory environment for Musk. donated hundreds of millions of dollars He was a close adviser to the president-elect during the transition period, according to political action committees and reports supporting Donald Trump’s presidential campaign. Current SEC Chairman Gary Gensler is likely to be replaced by Trump’s nominee, Paul Atkins. lighter regulatory touch.

Musk’s attorney, Alex Spiro, says he believes the complaint is a divisive move. “The SEC’s multi-year campaign of harassment against Mr. Musk has resulted in a single complaint being filed against Mr. Musk, as the SEC has stepped back and left office,” he wrote in an email.

Although the documents came just before Trump’s Jan. 20 inauguration, the investigation that led to the complaint has been ongoing for years. The agency was supposed to subpoena Musk in May 2023 to testify in the investigation. said Musk canceled them two days before his scheduled testimony that September. Federal court defended a previous order to compel him to testify in May 2024; SEC lawyers flew in to interview him on September 10, but he raised them up to once again participate in a SpaceX launch.