Daily Management Review

SEC investigates Tesla for possible securities law breach: WSJ


07/12/2016




SEC investigates Tesla for possible securities law breach: WSJ
Tesla is being investigated for potentially taking too long to disclose a fatal crash in May. The Securities and Exchange Commission is concerned about the crash that has called into question the safety of a system in the car that takes control of steering and braking, the Wall Street Journal reported citing an unnamed source.
 
It "has not received any communication from the SEC regarding this issue," Tesla said in a statement in response to the report. There were no comments from the SEC.
 
Following the publication of the report on the Journal's website, Tesla shares fell 1.3 percent in after-hours trading. Following a tweet on Sunday by Chief Executive Elon Musk that he is working on a "Top Secret Masterplan, Part 2" for the electric car company, the stock of the company had risen 3.7 percent during regular trading.
 
In the tweet Musk stated that he hoped to "publish later this week" which hinted at a possible new vision for the company.
 
Tesla should have disclosed the fatal accident involved a Model S sedan that was operating in Autopilot mode as a “material” event, or a development a reasonable investor would consider important, feels the SEC which is scrutinizing the role of the company, the Journal said in the report.
 
What action would be taken by SEC is still unclear. Fatal auto accidents involving their vehicles are not customarily reported as material events by automakers to shareholders. Reporting accidents where emerging auto-driving technology may be a factor does not yet have an established practice.
 
It was investigating the May 7 accident in Florida, in which 40-year-old Joshua Brown was killed, the U.S. National Highway Traffic Safety Administration (NHTSA) has already said.

Christopher O'Neil, a spokesman for the agency, which makes recommendations to regulators and companies about transportation-related safety issues said that the NHTSA is sending a five-person team to Florida later this week to investigate that crash.
 
Since the Autopilot is key to its image as a pioneer in automotive technology, the timing of Tesla's disclosures about the accident has become an issue for the company. A system in which a person can drive with hands off the wheel for an extended period while a car is in motion has not been released to the public by any other automaker.
 
A driver should keep hands on the wheel all the time, and it has cautioned that the system is in beta, or test, Tesla has said and added that Autopilot should be used as a backup and not as a replacement for the driver.
 
In a defense of Tesla's decision not to disclose the accident to the public until June 30, when NHTSA said it was launching its investigation, Musk used his Twitter account last week.
 
Tesla said that as it conducted its own internal probe into the crash, it alerted NHTSA on May 16, nine days after the accident.  
 
To determine whether Autopilot functions were engaged at the time of the accident, NHTSA was also looking into a July 1 crash in Pennsylvania of a Tesla Model X sport utility vehicle, the agency said last week.

(Source:www.reuters.com) 






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