The SEC is suing Elon Musk. It’s all in the timing

With time running out for the Biden administration, the US Securities and Exchange Commission filed a lawsuit Elon Musk In federal court. The basic system at hand is relatively straightforward. The timing of the complaint is more complex.

The SEC’s complaint focuses on Musk’s acquisition of Twitter stock in early 2022. According to the complaint, Musk failed to notify the agency that he acquired more than 5 percent of the company’s common stock within 10 calendar days. If true, this delay would violate federal security laws. “As a result, Musk was able to continue purchasing shares at artificially low prices,” the SEC said. Allegedly“Which would allow him to pay at least $150 million for the shares he purchased after the beneficial ownership report was due.” The Securities and Exchange Commission has requested a jury trial.

All of this should be very simple. “It seems to be a clear case of a clear violation of a well-established SEC rule,” says James Park, a professor at the University of California School of Law who focuses on securities regulation and corporate law. You either submit your papers within 10 days or you don’t; The SEC claims Musk did not do so. He acquired enough shares to exceed that limit by March 14 of that year, the agency claims, and did not publicly disclose his ownership until April 4. March 24.)

However, it took nearly three years for the SEC to bring the case. “The question is: why are they doing it now,” says David Rosenfeld, former co-head of the SEC’s New York enforcement office and now a professor at Northern Illinois University School of Law. “The only reasonable answer is that they want to get this done before the administration changes.” Rosenfeld notes that he has not reviewed the SEC’s complaint in depth.

The change in executive authority, which occurs in less than a week, creates a more favorable regulatory environment for Musk. Donated hundreds of millions of dollars He served on political action committees supporting Donald Trump’s presidential campaign and was reportedly a close advisor to the president-elect during the transition. The current Chairman of the Securities and Exchange Commission, Gary Gensler, will likely be replaced by Trump’s nominee, Paul Atkins, who is widely seen as supporting Lighter organizational touch.

Alex Spiro, Musk’s lawyer, says he believes the complaint is just a parting shot. “As the SEC steps back and leaves office, the SEC’s multi-year campaign of harassment against Mr. Musk has culminated in the filing of an individual complaint against Mr. Musk,” he wrote in an email.

While the filing of the complaint comes before Trump’s inauguration on January 20, the investigation that led to this complaint has been in the works for years. The agency was forced to subpoena Musk in May 2023 to obtain his testimony in the investigation He said Musk canceled those hearings two days before his scheduled testimony in September of that year. Federal court Upheld A previous decision to compel him to testify in May 2024; SEC lawyers traveled to meet him on September 10, but he… I stood up for them Back to attend the SpaceX launch.