In yet another episode in the ongoing battle between the SEC and billionaire Elon Musk, a federal judge has rejected Musk’s bid to have a settlement thrown out arising from a tweet he posted in 2018. The parties reached the settlement after Musk tweeted a message suggesting he had the funding lined up to take Tesla private at $420 per share. An investigation revealed that the funding was far from locked up, but Tesla stock rose nonetheless as a result of the communication.
In the view of the SEC and other regulatory bodies, such deceptive statements, whether flippant tweets or more calculated missives, deceive the public and poison the larger trading environment.
Anyone Who Posts Is Taking A Chance
You don’t have to be Elon Musk to draw the scrutiny of SEC investigators. Anyone making social media posts about investments runs the risk of crossing a line into regulatory trouble.
In 2015, the SEC accused a Scottish stock trader of posting misleading tweets that suggested one company was under investigation for fraud and another had failed a drug safety trial. According to the allegations, the tweets were posted by accounts that were created to mimic reputable stock trading companies.
In another enforcement action, the SEC targeted a Canadian couple suspected of using Facebook and Twitter to falsely inflate the value of penny stocks and sell them in turn in a scalping scheme. A judgment ordered each person to pay $150,000 in civil penalties.
Proceed Carefully Before Communicating
Whether you are a broker-dealer, work for a publicly traded company or are an individual investor, you must be very careful before posting anything on social media that could possibly affect your holdings. A good rule of thumb is: When in doubt, don’t post.
If your business needs require you to post on social media, get sound legal advice before posting anything that could trigger an investigation. The attorneys at Ford O’Brien Landy LLP are well-versed in the complex regulations governing public communications regarding stocks and securities. We encourage you to contact us if you have questions about any of these matters. With offices in New York City and Austin, Texas, we advise and represent clients nationwide.
Sources: PBS.org, “Elon Musk ordered to abide by SEC settlement over 2018 tweets,” April 27, 2022; SEC.gov, “Updated Investor Alert: Social Media and Investing — Stock Rumors,” November 5, 2015