As the Biden administration comes to an end, the U.S. Securities and Exchange Commission has sued Elon Musk in federal court. The applicable regulation is relatively basic. The timing of filing a complaint is more complicated.
The SEC’s complaint focuses on Musk’s acquisition of Twitter stock in early 2022. The complaint says Musk failed to notify 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 regulations. “As a result, Musk was able to continue purchasing shares at artificially low prices,” SEC claims“enabling him to underpay by at least $150 million for shares he acquired after the beneficial ownership report deadline.” The SEC asked for a jury trial.
This should all be quite basic. “It looks like a straightforward case involving a clear violation of well-established SEC rules,” says James Park, a professor at the University of California, Los Angeles School of Law who focuses on securities regulation and corporate law. Either you file within 10 days or you don’t; The SEC says Musk didn’t do it. The agency says he acquired enough shares to cross that threshold by March 14 this year, and only publicly disclosed his ownership on April 4. (The SEC says Musk was technically 11 days delayed because he continued to purchase shares via March 24.)
Yet it took almost three years to bring the case to the SEC. “The question is why they’re doing it now,” says David Rosenfeld, former co-chief of the SEC’s Fresh York office of enforcement and now a professor at Northern Illinois University College of Law. “The only credible answer is that they want to do it before the change of administration.” Rosenfeld notes that he has not reviewed the SEC complaint in detail.
This change in executive power, which comes in less than a week, creates a more favorable regulatory environment for Musk, who has given hundreds of millions of dollars to political action committees supporting Donald Trump’s presidential campaign and was reportedly a close adviser to the president-elect during the transition. Current SEC Chairman Gary Gensler will likely be replaced by Trump nominee Paul Atkins, widely seen as a supporter lighter regulatory nature.
Musk’s lawyer, Alex Spiro, says his complaint is a breakup shot. “With the SEC’s withdrawal and departure from office, the SEC’s multi-year campaign to harass Mr. Musk has culminated in the filing of a single complaint against Mr. Musk,” he wrote in an email.
Although the filing comes just before Trump’s inauguration on Jan. 20, the investigation that led to the complaint took years. In May 2023, the agency had to subpoena Musk to obtain his testimony in the investigation he said which Musk recanted two days before his scheduled September testimony. Federal court sustained an earlier decision ordering him to testify in May 2024; SEC lawyers flew in to interview him on September 10, but he he set them up take part in a SpaceX launch once again.