The Securities and Exchange Commission (SEC) requested a federal judge to hold Tesla Motors (NASDAQ: TSLA) CEO Elon Musk in contempt for violating the terms of their settlement agreement.

In September last year, the SEC filed a complaint against Musk for allegedly tweeting false and misleading statements about Tesla. Musk agreed to settle the charges.

The following month, the U.S. District Court for the Southern District of New York entered a Final Judgement against Musk.  The Court ordered him to seek pre-approval of any written communications including social media posts relevant to Tesla or its shareholders. This requirement is part of the terms of the settlement deal between Musk and the SEC. Its purpose is to prevent him from “recklessly disseminating false or inaccurate information about Tesla.”

In a court filing, the SEC cited that Musk tweeted “inaccurate” information on February 19. He wrote, “Tesla made 0 cars in 2011, but will make around 500k in 2019.”  After a few hours, he corrected his tweet and explained, “Meant to say annualized production rate at end of 2019 probably 500k, ie 10k cars/week Deliveries for year still estimated to be about 400k.”

SEC says Musk admitted his violation

The regulator said Musk “did not seek or receive pre-approval” before publishing his tweet” as required by the Court. Tesla’s counsel confirmed that he failed to comply with the Court’s Final Judgement and the company’s policy.

The SEC argued that the admission is “clear and convincing evidence” that Musk violated the Court’s Final Judgment. He did not try to diligently comply with the order. Additionally, the regulator emphasized that Musk understood the order because it is “clear and unambiguous.”

In conclusion, the regulator wrote, "For all the reasons stated, the SEC respectfully requests that the Court enter an order to show cause why Defendant Elon Musk should not be held in contempt of the Court's October 16, 2018 Final Judgment.”

The stock price of Tesla declined following reports about the action of the SEC against the company. TSLA stock closed $298.77 per share, down by five percent on Monday.

Today, the stock opened $292.22 per share, but managed to regain some of its losses. It is trading $298.30, still down by 0.16 percent around 3:07 in the afternoon in New York.