The U.S. Securities and Exchange Commission (SEC) is proposing to settle its case against billionaire Elon Musk — alleging that he breached the securities rules by failing to disclose that he was building up an equity position in Twitter Inc. in early 2022 — for a US$1.5-million penalty.
The SEC alleged that Musk, and a related trust (the Elon Musk Revocable Trust), violated federal securities rules, which required them to disclose when Musk’s efforts to acquire Twitter stock crossed the 5% threshold.
According to the regulator’s complaint, in March 2022, Musk began acquiring shares in Twitter, and by March 14 had crossed the 5% mark — requiring him to disclose this fact by March 24.
However, the SEC alleged that Musk ignored that requirement, and didn’t disclose his stake in Twitter until April 4, when it had reached 9% — a disclosure that caused the stock price to jump by more than 27%.
The fact that Musk didn’t disclose when his position passed the 5% mark allowed him to continue acquiring US$500 million worth of stock at lower prices than if the material information — his 5% stake — was known to the market, the regulator alleged.
“Investors who sold Twitter common stock during this period did so at artificially low prices and thus suffered substantial economic harm,” it said in its complaint.
Now, the SEC has filed a proposed final judgment to settle the case against the trust, on consent.
Without admitting or denying the allegations of the complaint, the trust agreed to settle the case with a permanent injunction and to pay a US$1.5 million penalty.
If the court approves the settlement with the trust, the SEC will dismiss the case against Musk personally, to fully resolve the enforcement action.