Insider Trading is Bad, Mmmkay?

🕵️ The SEC has been investigating whether Tesla CEO Elon Musk and his brother violated insider trading rules, according to the WSJ. At the center of the issue? A Twitter poll from Elon last November asking if he should sell Tesla shares.

• Kimbal Musk sold Tesla shares worth $108 million one day ahead of Elon’s poll. 58% of respondents said he should sell, which caused the share price to fall sharply. Elon sold off billions of dollars worth of stock in the following days.
• The key question for regulators is whether Kimbal learned about his brother’s upcoming tweet or the timing of his sales – either from Elon himself or other sources – ahead of Kimbal’s own $108 million sell-off, which was his largest ever in terms of value (2nd place: $25 million).
• By law, employees and directors of public companies are generally banned from buying or selling shares when they’re aware of nonpublic material information, but can avoid insider trading charges when they buy or sell using a preset trading plan.
• Kimbal serves on Tesla’s board of directors, and had not previously indicated any plans to sell shares in this case.

🇺🇸 Zoom out: There’s a growing movement in the US to crack down on influential individuals trading stocks with insider knowledge. The Federal Reserve issued new guidelines last week banning its top officials from buying and holding a wide range of investment products starting May 1.

Earlier this month, House Speaker Nancy Pelosi (D-CA) said she’d support a bill to ban lawmakers – and potentially other government leaders – from trading stocks. The legislation is expected to be put up for a vote this year.