That’s the question behind the reported insider-trading investigation by the SEC into Kimbal Musk’s sale of Tesla shares before Elon Musk made his own stock sale plans public. According to the Wall Street Journal, the SEC launched its investigation after Kimbal Musk sold $108 million of his stock a day before Elon Musk polled Twitter users about selling 10% of his entire stake. The Twitter announcement and Elon’s eventual share sale sent Tesla shares into decline, and they eventually fell more than 30% from their preannouncement levels.

In addition to being Elon’s brother, Kimbal is also on the Tesla board of directors. Insider-trading rules prohibit company employees or board members from trading on material nonpublic information.

Attorneys for Kimbal Musk and Elon Musk declined to comment.

Yet, attorneys who specialize in insider trading say the case against the Musk brothers could be especially difficult to prove.

First, Elon Musk’s personal plans for his own stock may not necessarily qualify as company information. Unlike a pending merger announcement or big product launch or recall, Musk’s plans to sell his stock could be considered his personal information rather than company material.

“Judgments around insider-trading are now less about manipulating the market or being unfair, but about misusing information that belongs to an employer,” said Howard A. Fischer, a partner at Moses & Singer in New York.

Musk told the Financial Times in an email that Tesla’s lawyers were “aware” of his pending Twitter poll. But he said “Kimbal had no idea I was going to do a Twitter poll.”

A bigger hurdle for any insider-trading charges or allegations will be proof of communication. If Kimbal Musk happened to overhear Elon Musk talking about a stock sale or simply inferred that Elon was going to sell from another conversation, insider-trading charges could be difficult to pursue.

Attorneys say the SEC will likely try to retrieve all communications between Kimbal and Elon Musk in the days or weeks leading up to the sale. That could include their personal and corporate email accounts, any texts or other chat apps, as well as accounts of conversations and records of any board communications.

If they discussed a stock sale orally, without witnesses, proving insider-information could be difficult. It will depend on what evidence they have, Fischer explained.

“It may simply be a total coincidence that he sold right before a market-moving event. Or maybe they were at a family barbecue — if the Musks had family barbecues — and Kimbal just surmised that Elon was about to do something without having a specific conversation about the stock.”

Here is the 2021 timeline for Kimbal’s sale and Elon’s Twitter poll and sales.

Sept. 14: Elon Musk creates a 10b51 plan to sell Tesla stock. This is not publicly disclosed at the time.
Sept. 29: Elon says at the Code Conference that since he has options expiring in Aug. 2022, he will sell shares to pay the taxes by the end of the year. “I have a bunch of options that are expiring early next year, so that’s a huge block of options we’ll sell in Q4.”
Nov. 5: Kimbal Musk sells 88,500 shares of Tesla — about 15% of his total holdings — for an average price of $1,229 a share. His total proceeds are $108.8 million.
Nov. 6: Elon Musk tweets out a poll to his followers: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?” Musk promises to abide by the results, which result in a 58% voting in favor. Tesla’s share price begins to fall.
Nov. 10: Elon Musk sells over $4 billion in Tesla stock, kicking off nearly two months of stock sales. In the SEC filing, he disclosed that the sales were part of the September scheduled-selling program.
Dec. 28: Elon Musk completes his stock sales totaling $16 billion.
Tesla’s share price is now around $812 a share — about 34% below the price at which Kimbal Musk sold his shares.