Here’s what legal experts are saying about the SEC’s decision to sue Elon Musk

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The Securities and Exchange Commission filed a lawsuit against Tesla CEO Elon Musk on Thursday, alleging that Musk made “false and misleading statements” in August about the possibility of taking the automaker private. The agency said in the lawsuit that it seeks to bar Musk from being an officer or director of a public company.

On August 7, Musk said that he had “funding secured” to convert Tesla into a private company at $420 per share and only needed a shareholder vote to confirm a go-private deal. In its lawsuit, the SEC alleges that Musk had not acquired the necessary funding or even discussed the terms he mentioned with any potential backers. Those terms included the proposed $420 share price and an option for all existing Tesla shareholders to remain with the company after it went private.

Musk said he was “deeply saddened and disappointed” by the lawsuit, which he called “unjustified,” in a company statement to Business Insider.

Here’s what three legal experts told Business Insider about the lawsuit:

Gregory Sichenzia — partner at Sichenzia Ross Ference

  • The speed with which the SEC went from opening an investigation to filing a lawsuit was surprising.
  • The investigation’s subject was narrow, which may have influenced its speed.
  • Markets may be concerned about Tesla in the short term, but if Tesla is successful in the long term, the lawsuit won’t have much of an impact.
  • Musk shouldn’t step aside from the CEO role voluntarily since no one is better suited to the job than him.

Jay Dubow — partner at Pepper Hamilton

  • The SEC might have felt pressure to bring its case quickly due to Musk’s high profile.
  • When the SEC brings a case against a high-profile CEO, it scares employees at other companies and prevents misbehavior.
  • Though this lawsuit only names Musk, the SEC could potentially sue Tesla in the future.

Thomas Gorman — partner at Dorsey and Whitney and former SEC senior counsel

  • The SEC shouldn’t have sued Musk.
  • The Saudi Arabia Public Investment Fund’s reported interest in a take-private deal was enough to make Musk’s statements legal, if ill-advised.
  • Winning its case against Musk would be a significant victory for the SEC, as it would send a message to other companies about the agency’s ability and willingness to punish illegal activity.
  • But Gorman said he doesn’t believe the SEC brought its case against Musk as a means of self-promotion.

Read more about the SEC’s lawsuit against Elon Musk:

Have a Tesla news tip? Contact this reporter at mmatousek@businessinsider.com.

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