Tesla Chief Executive Elon Musk has until the end of the day on Monday to explain why he should not be held in contempt for recent tweets that US securities regulators say violated a September fraud settlement.
The US Securities and Exchange Commission asked a federal court in Manhattan to hold Musk in contempt after he tweeted about Tesla's production volume, saying he breached the agreement requiring him to get company approval before sharing any material information on social media.
The renewed public battle between Tesla's CEO and the SEC adds pressure on Musk, the public face of the electric vehicle-maker who is struggling to make it profitable after cutting the price of its Model 3 sedan to $35,000.
Musk on February 19 tweeted to his more than 24 million Twitter followers that Tesla would make around 500,000 cars in 2019.
He corrected the tweet four hours later to say the annualised production rate at year-end 2019 would probably be about 500,000, with deliveries of about 400,000.
A lawyer for Tesla and Musk told the SEC that the CEO believed the substance of the tweet had been pre-approved and disseminated when the company released fourth-quarter earnings in January.
The September settlement between Musk, Tesla and the SEC resolved an SEC lawsuit over claims Musk made on Twitter in August that he had "funding secured" to take Tesla private at $420 per share. The SEC called those tweets "false and misleading" and a go-private deal never materialized.
As part of that settlement, Musk stepped down as the company's chairman and he and Tesla agreed to pay $20 million each in fines.
Musk had called the regulator the "Shortseller Enrichment Commission" after the settlement, and tweeted that "something is broken with SEC oversight" just one day after the SEC started pursuing the contempt order. Hours later, US District Judge Alison Nathan set a March 11 deadline for Musk to respond.
Legal experts have said the SEC could now pursue multiple avenues, including a higher fine, imposing further restrictions on Musk's activities or removing him from Tesla's board or helm.
Tesla published a new communications policy in December for executives as part of the settlement. It called for Tesla's general counsel and a newly designated in-house securities law attorney to pre-approve any written statements about Tesla that could be material.
A disclosure controls committee, made up of board members Brad Buss, Antonio Gracias and James Murdoch, was tasked with overseeing compliance with the new policy.
© Thomson Reuters 2019