SEC launches probe into Elon, Kimbal Musk stock sales: WSJ

The Securities and Exchange Commission is reportedly investigating whether stock sales by Tesla CEO Elon Musk and his brother Kimbal violated insider trading rules. 

ELON MUSK CLAPS BACK AT ELIZABETH WARREN CLAIM THAT HE PAID ‘ZERO’ IN TAXES

Ticker	Security	Last	Change	Change %
TSLA	TESLA INC.	149.90	-5.55	-3.57%

According to the Wall Street Journal, the investigation kicked off after Kimbal sold 88,500 Tesla shares valued at approximately $108 million on Nov. 5. Kimbal's sale came a day before his brother Elon tweeted out a poll asking if he should offload 10% of his stake in the electric vehicle maker. 

Insider trading charges can typically be avoided when company officers or directors buy or sell shares under preset 10b5-1 trading plans.

Kimbal Musk, who sits on Tesla's board of directors, has made more than 40 disclosures since 2011 indicating that stock sales were made under a 10b5-1 plan, according to regulatory filings reviewed by the Journal. However, the filing for the November sale did not indicate that a 10b5-1 plan was used. In addition to the 88,500 shares, Kimball donated another 25,000 shares to charity, according to the filing. He still owns 511,240 shares. 

Meanwhile, Elon established his own 10b5-1 plan on Sept. 14 for the stock sales, according to regulatory filings.  

ELON MUSK, TESLA ACCUSE SEC OF ‘WEAPONIZING’ 2018 SETTLEMENT FOR ‘UNRELENTING’ INVESTIGATIONS

Elon Musk and Tesla recently accused the SEC of "weaponizing" a 2018 settlement with the company's shareholders for "unrelenting" investigations. 

"The SEC seems to be targeting Mr. Musk and Tesla for unrelenting investigation largely because Mr. Musk remains an outspoken critic of the government," Musk's lawyer, Alex Spiro, wrote in a letter to the U.S. District Court for the Southern District of New York earlier this month. 

"The SEC’s outsized efforts seem calculated to chill his exercise of First Amendment rights rather than to enforce generally applicable laws in even-handed fashion."

The 2018 settlement was reached to resolve SEC allegations that Musk made a "false and misleading" statement about having "funding secured" to take Tesla private at $420 per share. The agency also alleged he "knew or was reckless in not knowing" that his statements were false and/or misleading.

In addition to Tesla and Musk each paying $20 million in fines, the settlement required Musk to vet any tweets related to Tesla with a lawyer before sending them out. Tesla was also required to add two new independent board directors, and Musk was stripped of his chairman title. Under the terms of the settlement, Musk and Tesla neither admitted nor denied wrongdoing.

Since the settlement, the SEC has repeatedly questioned whether Musk has violated the agreement by tweeting about business matters, including Tesla's production numbers and the company’s stock price. According to a recent 10-K filing by Tesla, the SEC issued a subpoena Nov. 16 seeking information on the company’s "governance processes around compliance with the SEC settlement, as amended." 

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While representatives for Elon Musk and Tesla did not immediately return FOX Business' request for comment on the Journal's report, Musk reportedly told the Financial Times that Kimbal had "no idea" he would do the Twitter poll. The SEC declined to comment. 

Tesla shares have fallen around 30% year to date.