SEC claims authority to subpoena Elon Musk about tweets

Mar 22, 2022, 9:17 AM | Updated: Mar 24, 2022, 6:03 pm

DETROIT (AP) — U.S. securities regulators say they have legal authority to subpoena Tesla and CEO Elon Musk about his tweets, and that Musk’s move to throw out a 2018 court agreement that his tweets be pre-approved is not valid.

The Securities and Exchange Commission also disclosed publicly that it is investigating Musk’s Nov. 6, 2021 tweets that asked followers whether he should sell 10% of his Tesla stake. The commission confirmed that it issued administrative subpoenas while investigating whether Musk and Tesla are complying with disclosure controls in the 2018 agreement.

The commission also is investigating whether Tesla described accurately in public filings with the agency whether it complied with disclosure controls.

Details of the investigation were revealed Tuesday in the SEC’s response to a motion from a Musk attorney asking a Manhattan federal judge to nullify a subpoena and throw out the 2018 agreement, including a requirement that Musk’s tweets be pre-approved by a company attorney.

Musk attorney Alex Spiro also contended that the SEC has used the court agreement “to trample on Mr. Musk’s First Amendment rights and to impose prior restraints on his speech.”

The commission maintains that the subpoenas were lawful, and that Musk isn’t following proper legal procedure to challenge them. SEC attorney Melissa Armstrong called Musk’s challenge “frivolous,” and pointed out that Musk and Tesla agreed to have his tweets pre-approved by other company officials.

“Courts have long recognized that ‘congress has vested the SEC with broad authority to conduct investigations into possible violations of federal securities laws and to demand production of evidence relevant to such investigations,'” Armstrong wrote.

The subpoenas, issued under seal, come from a formal order by the commission authorizing the investigation. They seek all written communications concerning the Nov. 6 tweets and whether they were shown to Tesla lawyers for pre-approval.

Tesla did not object to its subpoena and is producing documents, Armstrong wrote. But Musk’s lawyer told the SEC that he would not produce any documents about pre-approval of his tweets, her response said.

Shortly after the November tweets about the stock sale Musk began selling off shares, and he wrote on Twitter that the sale would go to pay tax obligations on stock options. Analysts estimate his tax obligation at $10 billion to $15 billion.

So far he has sold more than 15 million shares worth roughly $16.4 billion. With some sales in late December, Musk is close to selling 10%.

In a motion filed in February with the U.S. District Court in Manhattan, Spiro contends that the subpoena of Musk has no basis in law. He also says the SEC can’t take action about Musk’s tweets without court authorization.

The whole dispute stems from an October 2018 agreement in which Musk and Tesla each agreed to pay $20 million in civil fines over Musk’s tweets about having the money to take Tesla private at $420 per share.

The funding was far from secured and the electric vehicle company remains public, but Tesla’s stock price jumped. The settlement specified governance changes, including Musk’s ouster as board chairman, as well as pre-approval of his tweets.

Spiro’s motion asks Nathan to scrap the agreement, alleging the SEC is using it and “near limitless resources” to chill Musk’s speech. It says that Musk signed the agreement when Tesla was a less mature company and SEC action jeopardized the company’s financing.

A message was left Tuesday seeking comment from Spiro.

The SEC is asking Judge Alison Nathan to deny Musk’s motion to throw out part of the agency’s subpoena and get rid of the 2018 agreement. Spiro has asked for verbal arguments in the case.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

UK holds ceremony replete with tradition to consider coins

LONDON (AP) — A jury sat solemnly in a gilded hall in central London on Tuesday, presided over by a bewigged representative of the crown in flowing black robes, but there were no criminals in the dock. Britain’s coinage was on trial. In a ceremony that dates back to the 12th century, the jury filed […]
11 hours ago
In this photo supplied by the Mozambican Presidency, Mozambican President Filipe Nyusi, left, shake...
Associated Press

Mozambique’s extremist rebels kill aid worker in north

MAPUTO, Mozambique (AP) — Extremist rebels in Mozambique’s northern Cabo Delgado province have killed a worker for the international charity Doctors Without Borders, shortly after a former vice president of the organization was asked to produce a report into the humanitarian situation in the conflict-hit region. Mozambique’s Islamic extremist insurgency, which started in October 2017, […]
11 hours ago
A baby girl who was born under the rubble caused by an earthquake that hit Syria and Turkey receive...
Associated Press

Newborn, toddler saved from rubble in quake-hit Syrian town

JINDERIS, Syria (AP) — Residents in a northwest Syrian town discovered a crying infant whose mother appears to have given birth to her while buried underneath the rubble of a five-story apartment building leveled by this week’s devastating earthquake, relatives and a doctor said Tuesday. The newborn girl was found buried under the debris with […]
11 hours ago
This cover image released by W.W. Norton shows "A Hacker's Mind: How the Powerful Bend Society's Ru...
Associated Press

Review: Digital tech advances, AI spur hacking of society

“A Hacker’s Mind: How the Powerful Bend Society’s Rules, and How to Bend Them Back” by Bruce Schneier (W.W. Norton & Company) Hacking is universally understood as the exploitation of a software vulnerability by a malicious actor. But hacking encompasses oh, so much more. By gaming systems, it achieves outcomes for which they were not […]
11 hours ago
Associated Press

Tickets for Beyoncé’s 1st concert of world tour sell out

STOCKHOLM (AP) — Tickets for the first concert of Beyoncé’s upcoming “Renaissance” world tour sold out Tuesday, and concert management group Live Nation said a second concert in Stockholm was added because of the high demand. The tour starts in Sweden in May and is scheduled to include stops in London, Paris, Barcelona, Toronto and […]
11 hours ago
Associated Press

Leipzig defender Willi Orbán readies for stem-cell donation

LEIPZIG, Germany (AP) — Leipzig defender Willi Orbán could miss a key game in his team’s Bundesliga title challenge because he is taking time out to make a potentially life-saving donation of stem cells to a cancer patient. Leipzig said Tuesday that the Hungary international has been on the German donor registry since 2017 and […]
11 hours ago

Sponsored Articles

...
Day & Night Air Conditioning, Heating and Plumbing

Company looking for oldest air conditioner and wants to reward homeowner with new one

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.
(Pexels Photo)...

Sports gambling can be fun for adults, but it’s a dangerous game for children

While adults may find that sports gambling is a way to enhance the experience with more than just fandom on the line, it can be a dangerous proposition if children get involved in the activity.
(Photo via MLB's Arizona Fall League / Twitter)...
Arizona Fall League

Top prospects to watch at this year’s Arizona Fall League

One of the most exciting elements of the MLB offseason is the Arizona Fall League, which began its 30th season Monday.
SEC claims authority to subpoena Elon Musk about tweets