By Katanga Johnson and Chris Prentice

WASHINGTON, (Reuters) – It has been another rollercoaster ride for Tesla (NASDAQ;) investors. Elon Musk, the billionaire chief executive of Tesla (NASDAQ:), promised via Twitter (NYSE 🙂 that he would sell 10% shares. It’s not clear if Musk or Tesla broke any rules, but his unusual approach to selling shares has caused a lot of controversy.

The electric carmaker lost more than $150 billion in value after Musk asked his Twitter followers over the weekend if he should sell 10% of his Tesla stake https://www.reuters.com/business/autos-transportation/tesla-selloff-puts-risk-its-1-trillion-club-membership-2021-11-10 to pay new taxes being discussed by Congress. Nearly 58% of respondents said they should.

On Wednesday, Tesla disclosed that Musk had offloaded https://www.reuters.com/business/autos-transportation/what-happened-with-musks-tesla-stock-sales-2021-11-11 3% of his stock in recent days. One sixth of these shares was sold through a corporate “trading program” which allows employees to trade their shares in company stock at a specified date to fulfill tax obligations. Musk’s poll was not included in the plan adopted September 14.

The filings did not say why Musk had sold the other 2.5% and as of Thursday it was unclear if the sales related to Musk’s Twitter poll https://www.reuters.com/business/finance/how-tweets-by-teslas-elon-musk-have-moved-markets-2021-11-08, or if he had yet sold the remaining 7%.

Tesla spokespersons and SEC spokespersons did not respond to requests for comment.

This episode raises questions about whether or not the celebrity billionaire violated any rules.

Below are five questions that Tesla-watchers want to know:

DID THE 2018 SEC SECSETTLEMENT SETTLEMENT MUSK STOP MUSK?

It’s not clear. This settlement was tightened by the SEC in 2019 and requires Musk that he review all tweets material for Tesla investors with a lawyer. Tesla has not yet said if it happened. Lawyers said that Musk’s tweet appeared to have ruined the stock. He would therefore be violating the settlement if he didn’t vet the Tweet.

What’s the deal with the TRADING PLANS SALES?

Insiders can trade in company stock at a future date using the “Rule 10b5-1 trading plan”. This provides legal protection from potential insider trading allegations based on non-public material.

Insiders of corporations often trade with the plan, but they also have the option to trade without it. Musk is no stranger to selling via this plan.

However, the plans themselves have more holes than a Swiss cheese, a problem SEC chair Gary Gensler has pledged https://www.reuters.com/business/us-secs-gensler-says-has-asked-staff-consider-new-rules-company-trading-plans-2021-06-07 to fix.

Some amount of chicanery can be legal. It is the lack of rules for ‘pre-planned stock sales’ that is to blame,” Daniel Taylor, professor and insider trading expert at the University of Pennsylvania.

SO DID MUSK TERMINATE TESLA BREACH SEEC DISCLOSURE RULES THEREFORE?

It’s not clear. Although it may seem unusual for chief executives to announce a large share sale via Twitter, Musk does so regularly and investors are familiar with Musk’s Twitter account. The tweets don’t seem to break any rules.

Musk may have been able to soften the blow by telling the stock market that he sold to pay his taxes.

Musk’s preplanned sales beg the question whether he had intended to sell stocks for tax reasons but that he was selling them at the request of his followers.

Howard Fischer, a partner at law firm Moses & Singer, said if Musk had concealed the real reason for his sales that could arguably be a disclosure violation, but at the same time there was a lot of public information on his reasoning for the sales.

SO WILL THE SEEC TAKE A LOOKING AT THE SALES?

SEC monitors all market movements and in the past has been closely following Musk. The SEC has asked Tesla three times, at most, since 2018, whether Musk’s tweets have been in line with settlement. These inquiries were based on public filings and documents internal to the SEC obtained through the Freedom of Information Act.

The agency’s new Democratic leadership is also eager https://www.reuters.com/legal/litigation/corporate-crackdown-us-sec-takes-aim-executive-pay-2021-10-22 to bring cases against big companies and their top executives.

Ty Gellasch from Healthy Markets said, “This case looks like yet another instance in which regulators and private Plaintiffs are going to invest years investigating what he knew and what he done, and why.”

However, lawyers said the SEC could not prove Musk’s conduct caused investor losses, which is usually a critical threshold to bring a sanction.

WTF, SO MUSK HASN’T DONE ANYTHING WRONG!

Time will show what the future holds in terms of securities law. His actions pose a problem from the corporate governance point of view, according to lawyers.

Fischer stated that “if Tesla were a normal business and Musk an ordinary executive, such behavior would result in a board rebuke, or worse.” Musk’s “oddities” are accepted by investors, he said.