SEC claims authority to subpoena Elon Musk about tweets
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%.
The 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.