Judge Tells Elon Musk, SEC to 'Put Your Reasonableness Pants On' and Settle Twitter Row in Two Weeks

Despite having "serious concerns," the judge asked Musk and SEC to restructure the terms of their prior settlement.

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Tesla CEO Elon Musk has dodged a contempt bullet brought forth by the United States Securities and Exchange Commission following a ruling from a New York federal judge on Thursday. Judge Alison Nathan has reportedly ruled that the SEC and Musk must reach a revised agreement within the next two weeks, undoubtedly looking for the duo to resolve their disagreements surrounding the automaker's social media policy for Musk.

The SEC charged Musk with fraud last September, only to settle out of court and establish a policy in which Musk would seek pre-approval before tweeting any information which could reasonably be construed as material. The parties allegedly spent a large majority of the time arguing over the possible material nature of Musk's tweets, and whether the information published by either Tesla or tweeted by the CEO were fact or forward-looking.

Of course, the SEC brought up the infamous Feb. 20 tweet where Musk made an inaccurate statement regarding Tesla's potential 2019 production numbers. It was argued that because a correction was made within "a few hours," it did not classify as material. The SEC argued that the point was not that a correction was made, but rather that the tweet should have been stopped prior to the potential misinformation reaching the public, per the enacted social media policy.

Musk had previously claimed the SEC's requirements violated his First Amendment right to free speech, but, according to CNBC, the SEC feels no need to police every tweet Musk makes, not even every Tesla-related conversation. Rather, the regulatory body seeks only those which involve material information which could affect valued assets (such as common stock) are reviewed before posting.

Judge Nathan reportedly began to push back at this point, asking the SEC to clarify what it considered to be material information and validate how the language of the settlement couldn't be misinterpreted as unambiguous given the specific language penned in the agreement. She continued to note that no order of contempt could be brought upon Musk if any question of ambiguity existed in the policy's wording, and that the terms of the SEC's prior settlement would need to be vacated or modified to clarify its intentions.

via SEC

Musk's lawyers agreed with the judge's notions that the SEC's settlement could be viewed as ambiguous in nature, but was later reminded that Musk could not decide to follow a narrower version of the settlement should he view it as such.

At one point during the trial, it was noted that the SEC asked the judge to impose a "meaningful fine" to make the settlement "not worth" the $20 million slap-on-the-wrist that Musk had previously been ordered to pay.

Ultimately, it was ruled that the SEC and Musk would have to come up with a meaningful, loophole-free settlement within two weeks. The judge noted that she had "serious concerns" that her ruling—regardless of the outcome—would not resolve the issue. She even went as far as to implore both Musk and the SEC to "put your reasonableness pants on" and solve the ongoing saga independently.

"I must and I will ensure that court orders are followed, regardless of whether you're a small potato or a big fish," Judge Nathan was quoted by an individual familiar with the matter. "That's the rule of law."

Musk could reportedly be seen smiling while being escorted from the courthouse following the ruling. The CEO later issued the following statement:

“I have great respect for Judge Nathan, and I’m pleased with her decision today. The tweet in question was true, immaterial to shareholders, and in no way a violation of my agreement with the SEC. We have always felt that we should be able to work through any disagreements directly with the SEC, rather than prematurely rushing to court. Today, that is exactly what Judge Nathan instructed.”