The SEC is suing Elon Musk. Timing matters

As the Biden administration’s time runs out, the US Securities and Exchange Commission has filed a lawsuit Elon Musk in federal court. The present law is relatively simple. The timing of the complaint is more complicated.

At the heart of the SEC’s complaint is Musk’s purchase of Twitter shares in early 2022. According to the complaint, Musk failed to tell the agency that he had acquired more than 5 percent of the company’s common stock within 10 calendar days. If true, this delay would violate federal safety laws. “As a result, Musk was able to continue purchasing shares at artificially low prices,” the SEC said claims“which allowed him to underpay by at least $150 million for shares he purchased after his beneficial ownership report was due.” The SEC has requested a jury trial.

This should all be pretty easy. “It looks like a simple case involving a clear violation of an established SEC rule,” said James Park, a professor at the UCLA School of Law who focuses on securities regulation and corporate law. Either you submit your documents within 10 days or you don’t. The SEC claims Musk did not do this. He acquired enough shares to exceed that threshold by March 14 of this year, the agency claims, and did not publicly disclose his ownership until April 4. (The SEC claims that Musk was technically 11 days late because he continued to acquire shares March 24.)

And yet it took almost three years for the SEC to file a lawsuit. “The question is why are they doing this now,” said David Rosenfeld, former co-chief of the SEC’s New York Division of Enforcement and currently a professor at Northern Illinois University College of Law. “The only plausible answer is that they want to get it done before the government changes.” Rosenfeld notes that he has not examined the SEC complaint in depth.

This executive change, coming in less than a week, creates a more favorable regulatory environment for Musk Donated hundreds of millions of dollars Member of political action committees supporting Donald Trump’s presidential campaign and was reported to have been a close adviser to the president-elect during the transition period. Current SEC Chairman Gary Gensler is likely to be replaced by Trump’s nominee Paul Atkins, who is widely seen as a supporter of a lighter regulatory touch.

Musk’s lawyer Alex Spiro says he considers the complaint to be a farewell. “As the SEC recuses itself and leaves office, the SEC’s multi-year harassment campaign against Mr. Musk culminated in the filing of a single-point ticky-tock complaint against Mr. Musk,” he wrote in an email.

Although the filing comes just before Trump’s inauguration on January 20, the investigation that led to this complaint took years. The authority had to subpoena Musk in May 2023 to obtain his statement in the investigation and has said that Musk canceled it two days before he was scheduled to testify in September. A federal court confirmed an earlier decision to compel him to testify in May 2024; SEC lawyers flew out to interview him on September 10, but he she put up once again to attend a SpaceX launch.