SEC says Elon Musk still needs a lawyer to approve his tweets

by Ana Lopez

The U.S. Securities and Exchange Commission (SEC) says Tesla CEO Elon Musk still needs attorney permission before tweeting Tesla-related information.

The SEC wrote down its renewed position this week in a letter to the U.S. Court of Appeals for the 2nd Circuit in New York, arguing that a prior settlement agreement between the agency and Musk is fully constitutional and valid.

In 2018, Musk tweeted that he had “secured funding” to take Tesla private at $420 per share and confirmed investor support for the deal. Tesla’s stock price fluctuated in the weeks that followed, prompting an SEC investigation into whether Musk had committed securities fraud.

Musk and Tesla settled without admitting wrongdoing. They each paid $20 million in fines, Musk stepped down as Tesla chairman, and he agreed to have most Tesla-related communications handled by an attorney before tweeting, lest he say something that affects the stock price.

In September 2022, Musk’s lawyers filed a summary judgment in an appeals court to relieve the executive branch of a “government-imposed muzzle” that “prohibits[s] and chill[s] Mr. Musk’s lawful speech.” This was a month after a federal judge overturned Musk’s motion to end the same SEC settlement provision.

Earlier this week, Musk’s lawyers argued that a recent jury verdict in a separate trial should be considered on appeal. In early February, Musk was found not liable for securities fraud in a class action lawsuit in which shareholders who lost money after Musk tweeted “funding secured” sued the executive for damages.

“In light of the jury finding that Mr. Musk’s tweets were not inconsistent Rule 10b-5lacks SEC support for both the consent decision itself and for its arguments on appeal,” Spiro writes. “The verdict provides further reason why the public interest in avoiding unconstitutional settlements readily subsumes the SEC’s alleged interest in the consent decree.”

Lawyers may present additional powers to a court of appeal after the filing of an interim injunction and before the court makes a decision if they find a new legal power directly related to the issue raised on appeal that affects the affect the outcome of the case.

The SEC refuted Spiro’s argument, saying a jury verdict in a private action for securities fraud does not qualify as “pertinent and significant” authority. The agency also argued that Musk “forgotten his chance to test the Commission’s allegations at trial when he voluntarily (twice) agreed to a consent decree.”

The agency argued that the ruling does not reflect the public interest of the negotiated settlement and does not prevent Musk from accurately tweeting about Tesla or other topics. SEC attorneys also questioned the legal basis for overturning the settlement years later.

The court can accept or cancel Spiro’s letter. A plea for the appeal is expected in the spring, but a date has not yet been set.

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