Elon Musk, credited with building Tesla into one of America’s most valuable car companies, has been fined $20 million by the Securities and Exchange Commission (SEC) of the US. Additionally, he has to step aside as chairman for three years. Not only Musk, but the company has also been fined $20 million. The crime: an irresponsible tweet from Musk, just last month.
Musk had boasted on 7 August 2018 on Twitter that he had secured funding for a buyout of his electric car company.
The immediate effect was a surge in Tesla shares. The tweet promised to turn the public company into a private one. Musk entered into the settlement with SEC involving such a hefty fine just two days after being sued by it for misleading investors.
The message from SEC is clear. When companies and corporate insiders make statements, they must act responsibly including endeavouring to ensure the statements are not false or misleading.
In mera mahaan Bharat,, such a tweet would not have even raised an eyebrow. Here fraudsters enjoy a life time duping investors and banks of billions of rupees and when the going gets tough, simply walk away. Some do not feel the need to do even this. Yet, life goes on as usual for them.
, the largest accounting fraud till date in the history of corporate India. Two US regulators, including the SEC, the Serious frauds Investigation office (SFIO), Central Bureau of Investigation (CBI) and the special CBI court, found the Satyam management and two auditors of PricewaterhouseCoopers (PwC) guilty of falsification of accounts
in 2009. Even nine years later, the Satyam management and PwC auditors are out on bail. No one feels the need to challenge it.
Auditors are now getting smarter. They just dump the audit when the going gets tough. To hell with their fiduciary duties. In the past three months since my earlier article highlighting how it could be fatal
for public interest, the number of auditors resignations has climbed from 37 to close to 200.
The resigning auditors include the big boys: Deloitte in case of Nirav Modi’s outfits to PwC in the case of Vakrangee where the ministry of corporate affairs (MCA) has ordered a probe.
Taking a cue from the auditors, some directors are also adopting the same modus operandi. And what has MCA done so far? Precious little. Reportedly, it is now in the process of initiating review of audit standards, making the auditors more accountable and is planning a new form for more disclosures from the resigning directors.
It is high time the Indian government takes lessons from the Musk episode. Cosmetic changes, scores of committees, endless paperwork but devoid of willingness to act against the rich and powerful are all meaningless. Only deterrent financial action makes sense, that too if taken swiftly.
If the US can do this in such a high-profile case and for something as trivial as a tweet, why can’t India do the same in scams running into thousands of crores of rupees and where a mountain of evidence exists?
How about Satyam, Vijay Mallya, Nirav Modi, Mehul Choksi, Religare for starters.
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(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.