Elon Musk seeks to end SEC “pits” that require pre-approval on tweets

Elon Musk seeks to end SEC “pits” that require pre-approval on tweets

By Jonathan Stemple

NEW YORK (Reuters) – Elon Musk’s lawyers are urging the Federal Court of Appeals to rescind a requirement in the 2018 US Securities and Exchange Commission (SEC) approval decree that requires a Tesla (NASDAQ:) attorney to examine some of his Twitter (NYSE:) positions.

In a filing late Tuesday to the Second U.S. Court of Appeals in Manhattan, Musk’s lawyers described the prior consent mandate as a “government-imposed gag” that impeded his legal discourse on a wide range of topics.

They also said that this requirement violates the US Constitution and undermines public policy by operating it “contrary to American principles of free speech and open debate.”

The Securities and Exchange Commission declined to comment on Wednesday. She is expected to submit her own submission to the Court of Appeal.

Musk wants to overturn part of an April 27 decision by U.S. District Judge Lewis Lehman, which rejected his attempt to overturn the consent decree altogether.

Lehman said Musk’s arguments amounted to “bemoaning” the requirements he no longer wanted to comply with now that “his company is, in his estimation, indomitable.”

Forbes magazine said on Wednesday that Musk, 51, has a fortune of $259.8 billion, nearly twice the wealth of anyone else.

The decree resolved a lawsuit accusing Musk of defrauding investors with an August 7, 2018 tweet stating that he had “taken funding” to take his electric car company, even though a takeover deal was not close. Musk said the tweet was sincere.

In a settlement, Musk agreed to allow Tesla’s lawyers to delete tweets that might contain material information about the company.

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Both he and Tesla also paid $20 million in civil fines, and Musk relinquished his role as Tesla’s president.

But the Securities and Exchange Commission later opened an investigation and summoned documents about Musk and Tesla’s compliance, after Musk asked his followers in a November 6, 2021 tweet if he should sell 10% of his stake in Tesla to cover his stock options tax bills.

In a filing Tuesday, Musk’s lawyers said it was time to rein in the Securities and Exchange Commission, which puts him under a “perpetual threat”, and may dismiss his view on pre-approval disclosures.

“Under the consent decree, the SEC has monitored, guarded and attempted to curb Mr. Musk’s protected speech that does not touch the federal securities laws,” the lawyers wrote. “Any objective served by the prior approval requirement has been achieved.”

Musk is separately trying to ditch his April deal to buy Twitter for $44 billion, saying the company misled him by downplaying the number of fake accounts.

Twitter sued Musk to force him to complete the merger at the agreed-upon price, 23% higher than the price at which its shares closed on Tuesday. A non-jury trial is scheduled for October 17 in Delaware Chancery Court.

The case is Musk v SEC, 2nd U.S. Court of Appeals Circuit, No. 1291-22.

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