By David Rosenfeld*
Elon Musk doesn’t much like the SEC. He has said publicly that he does “not respect the SEC” and called them “bastards.” He has repeatedly claimed that the SEC coerced him into a settlement over his “Taking Tesla Private” tweets by putting a gun to his child’s head. Musk has also pushed the envelope, testing the limits of the settlement agreement. So, what should the SEC do about Musk, a man routinely described as ii “incorrigible”? So far, the SEC has shown a certain amount of restraint in the face of Musk’s provocations, although Musk clearly doesn’t see it that way. It hasn’t been easy for the agency to show restraint, and it has been widely criticized for not standing up to the world’s richest man. But sometimes, restraint is the better part of wisdom. There are times when the remedy can be worse than the disease. Too often, the SEC acts reflexively when it comes to enforcement and seeks to impose the maximum sanctions available without considering all the collateral consequences. Indeed, a look back at the events surrounding the original settlement shows that the SEC may have acted a bit rashly when it filed a lawsuit seeking to bar Musk from serving as an officer or director of a public company. The SEC’s enforcers have many tools at their disposal and need to be guided by the overarching goal of investor protection. In the case of Musk, that may mean holding their noses a bit by letting investor protection take precedence.