SEC Investigating Tesla for Failing to Notify Investors of Fatal Crash

Was the fatal May crash of a Tesla Model S driving in Autopilot mode significant enough for the automaker to inform its shareholders? The Securities and Exchange Commission plans to find out.

The federal agency recently opened an investigation into Tesla to determine if the automaker broke securities laws by not notifying investors of the crash, according to the Wall Street Journal.

To reach a conclusion, the SEC needs to decide whether the May 7 crash that killed Joshua Brown on a Florida highway was a “material” event — an incident serious enough to warrant a securities filing, which would make investors aware of potential risk.

Brown died after his vehicle’s semi-autonomous Autopilot system failed to recognize a tractor-trailer crossing the highway in front of him. The radar-and-camera setup controlling the system mistook the brightly lit trailer for the surrounding sky, meaning it didn’t alert the driver or begin emergency braking.

Tesla informed the National Highway Traffic Safety Administration of the crash on May 16, but the first time investors heard of it was a June 30 blog post on the automaker’s website. (That post coincided with media reports detailing the NHTSA’s investigation into the crash.)

By late May, Tesla investigators determined that the victim’s Autopilot system contributed to the crash, but not before the company sold $2 billion of stock.

A source familiar with the matter told the WSJ that the SEC investigation is preliminary, and might not result in any action on the part of the agency.

Even before the SEC announced its probe, some critics argued the crash counted as “material.” Tesla and the publication Fortune waged an online battle over the debate, with the magazine stating the automaker should have revealed details of the crash earlier.

[Image: Tesla Motors]

Correction: An earlier version of this story stated the Tesla Autopilot system used laser and camera technology to see objects in its vicinity. Tesla vehicles do not use laser, but use radar. We’ve corrected the article to reflect this.