All eyes on SEC

Pressure to act in high-profile Musk case

For months, the Securities and Exchange Commission had been quietly and methodically scrutinizing Tesla.

Then, Chief Executive Elon Musk tweeted, forcing the SEC to change its approach in an investigation that’s now putting intense pressure on the regulator.

Actions probed by the SEC aren’t typically so public, and the agency prefers to keep it that way until it concludes whether laws were broken.

The opposite has happened with Tesla, which has quickly become the highestprofile inquiry of SEC boss Jay Clayton’s tenure. One resulting sentiment within the SEC: The agency will take a public beating if Musk avoids a sanction, a person familiar with the matter said.

“This is so visible that it’d be hard for the SEC not to do something,” said James Cox, a Duke University School of Law professor.

The US hasn’t confirmed it’s investigating Tesla, and SEC spokeswoman Judith Burns declined to comment. Tesla didn’t respond to a re- quest for comment.

Shares of the electric-car maker dropped by 26 cents Wednesday, to $321.64

The SEC hasn’t accused Musk of any wrongdoing, and it can take years for the regulator to conclude that an executive has violated securities laws. But Tesla investors may not be so patient in light of the attention Musk brought when he claimed he was considering taking Tesla private and had lined up funding to do so.

There are already signs the SEC is moving fast.

In the Tesla probe, the SEC demanded information by issuing subpoenas within days of Musk’s Aug. 7 tweet, potentially shrinking its investigative timeline. And The New York Times reported Aug. 17 that agency officials were preparing to meet with Musk and Tesla directors as soon as this week.

The SEC was already investigating Tesla before Musk sent his tweet, Bloomberg reported Aug. 9. The existing probe focused on whether Tesla had issued misleading pronouncements on manufacturing goals and sales targets, two sources said.