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The SEC is investigating whether Tesla should have told its investors about a fatal crash

The results of the probe could set a precedent for disclosures by other companies working on autonomous cars.

Asa Mathat

The Securities and Exchange Commission is opening an investigation into Tesla to determine whether the company should have told shareholders earlier about a fatal crash related to its autonomous driving tech, according to a report in the Wall Street Journal.

Joshua Brown was killed on May 7 when his Tesla, operating in Autopilot mode, drove into a tractor-trailer that was crossing the highway. Autopilot is a semi-autonomous driving technology that’s a much more sophisticated version of cruise control.

Weeks later, the National Highway Traffic Safety Administration opened an investigation into the accident to determine whether the technology worked as expected.

This SEC probe, on the other hand, is not about the technology; it’s about whether, under securities law, Tesla should have told its investors about the accident sooner. A Tesla spokesperson said the company had not received any communication from the SEC as yet.

The results of the SEC probe will set a precedent for the auto industry as more automakers roll out their own versions of Autopilot. The 2017 Mercedes Benz E class will be equipped with semi-autonomous technology called Drive Pilot, Volvo’s XC90 already has semi-autonomous technology called Pilot Assist and General Motors’ Super Cruise technology is expected to become available in the 2017 Cadillac CT6.

Automakers typically don’t disclose to investors every single accident in which their vehicles are involved. If, however, the SEC determines that Tesla should have disclosed this accident to its investors, that may all change.

That’s because given the relatively nascent state of today’s semi-autonomous technology and the amount of money flowing into the business, a possible failure or misuse of the technology could have an immediate impact on the company’s stock.

Tesla has stated publicly the company had no reason to disclose the accident to its investors because it did not see the accident as material to company performance. The company’s stated “risk factors” cite the possibility of liability claims stemming from its Autopilot, not just a misuse of the tech by itself.

Fortune, however, wrote about what it saw as a lapse in Tesla’s disclosure, noting how the company’s stock had moved as investors started to learn more about the crash.

Tesla’s response read: “Neither at the time of this SEC filing, nor in the several weeks to date, has anyone brought a product liability claim against Tesla relating to the crash in Florida.”

The company’s risk factors, according to SEC filings (emphasis Recode’s):

Product liability claims could harm our business, prospects, operating results and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected resulting in personal injury or death. We also may face similar claims related to any misuse or failures of new technologies that we are pioneering, including autopilot in our vehicles and our Tesla Energy products. A successful product liability claim against us with respect to any aspect of our products could require us to pay a substantial monetary award.

The SEC uses these filings as a template against which it reviews elements for disclosure. Even with the risk statement, the SEC could find that investors should have been told about the accident because it involved the company’s semi-autonomous technology and it could result in a liability claim.

In addition to probes by the NHTSA and now the SEC, the accident also prompted the National Transportation Safety Board to open an investigation into the circumstances of the accident to determine whether today’s semi-autonomous technology is truly safe. NHTSA has also opened an investigation into a second, non-fatal Autopilot-related crash in Pennsylvania.

This article originally appeared on

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