The U.S. Securities and Exchange Commission (SEC) is investigating.$Tesla (TSLA.US)$CEO Musk delayed disclosure of his purchase of Twitter stocks before taking over the company.

According to reports, Elon Musk's testimony to the SEC showed that he and his advisors ignored a rule that required him to disclose ownership when his stake in Twitter exceeded 5%. Court documents showed that Musk waited until his stake exceeded 9% and he received an invitation to join the board of directors before disclosing his holding.

Musk may be charged with violating this rule in order to keep his trading secret and prevent Twitter stock from rising as he accumulated shares. The SEC said in court documents that it is investigating whether Musk committed civil fraud by delaying disclosure or misleading the market about his plans.

So far, the SEC has not taken any enforcement action against Musk regarding Twitter stock trading. Going forward, if the SEC files a formal fraud complaint against Musk, regulatory agencies may ask the court to prohibit him from serving as a senior officer or director of a publicly traded company in the United States.

The SEC previously sued Musk over his tweet in 2018 about taking Tesla private with "funding secured". The SEC also accused Tesla of failing to establish necessary disclosure controls and procedures in connection with Musk's tweets, and Tesla has agreed to settle this charge.

Legal experts believe that the SEC faces an uphill battle because intentionally evading mandatory disclosure plans does not necessarily translate into regulatory violations becoming fraudulent acts. Musk is expected to appear before the SEC again to answer questions about his Twitter trading.

Edited by Jeffrey