Elon Musk is known for many things, including founding Paypal and serving as the CEO of Tesla Motors. In addition to making cars, building spaceships, and investing in a wide variety of technology start ups, Musk is also known for his prolific tweeting. Unfortunately, not everyone likes Musk’s use of the social media platform Twitter, and his tweets have not only created controversy, but they have also led to legal troubles with the U.S. Securities and Exchange Commission (SEC). Now, the SEC wants clearer guidelines how social media usage can violate federal law and lead to commercial litigation.
Musk’s trouble with the SEC goes back to August 2018 when the CEO tweeted he was going to take Tesla private. This caused Tesla’s stock price to skyrocket, as eager investors wanted to purchase stock before the buyback; however, the SEC found Musk’s statement “lacked an adequate basis in fact” and filed a lawsuit against him for violating federal securities law. Just months later, Musk got in trouble again when tweeting about the company’s commitment to produce a certain number of cars in 2019.
Determining whether or not an individual’s social media use has violated securities laws is often not black and white. Current regulations don’t mention social media use, which has prompted the SEC Commissioners to ask for new guidelines. SEC Commissioner Robert Jackson said, “Without prejudging a particular matter, it might be time for us to come forward and say, here are some principles of this game.”
Nearly everyone uses some type of social media platform and company executives are no exception. While executives may want to share company information on social media, they still have a responsibility to investors and shareholders. Executives are allowed to share information on social media, but investors must be informed on what social media channel will be used to push out market sensitive information.
Even though the SEC has yet to adopt specific guidelines for social media use, the agency is committed to pursuing securities violations, which include violations that occur on social media. And, it’s important to note, social media usage can be a huge source of liability for a business well beyond securities violations.
Houston Commercial Litigation Attorneys
If you are facing any type of litigation arising from your social media use or want to pursue a claim against another party for their use of social media, do not wait to contact Feldman & Feldman. We can review your case and explain your legal options.