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WHAT ARE THE SEC'S RULES AROUND FAIR DISCLOSURE?

Tesla CEO Elon Musk's tweets about the firm going private have reportedly drawn a closer look from the Securities and Exchange Commission. 

The SEC is now looking at whether what Musk said was truthful and why he announced the information on his Twitter. 

The regulatory agency has certain rules around what companies can and cannot speak about on social media platforms, as part of its fair disclosure rules. 

Many believe Musk's tweets are likely to be weighed against the Reed Hastings Rule, which was established in 2012. 

The rule was established when Netflix CEO Reed Hastings used his Facebook to post that the streaming service had 'exceeded 1 billion hours for the first time.' 

This warranted further investigation by SEC regulators, who later determined that posting material information on social media is allowed. 

However, companies must make sure that shareholders are notified that material announcements will be made on social media channels, as well as given proper access to them. 

In Musk's case, Tesla has only told investors to monitor the CEO’s Twitter feed in a public filing once, back in 2013. 

Beyond that, regulators will be working to find out whether Musk's claims were honest. 

Musk tweeted that financing had been secured for a take-private deal and that the company had received broad investor support. 

If Tesla doesn't have the funding in place, experts say Musk's tweets could amount to market manipulation, since it would be an example of false statements causing the company's shares to skyrocket. 

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