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The US Securities and Exchange Commission says that Tesla CEO Elon Musk has yet to obtain pre-approval from lawyers before tweeting Tesla-related information.
The SEC set out its renewed stance this week in a letter to the U.S. Circuit Court of Appeals for the 2nd Circuit in New York, arguing that a previous settlement agreement between the agency and Musk was fully constitutional and valid.
In 2018, Musk tweeted that he had “secured funding” to take Tesla private for $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 resigned as Tesla chairman, and he agreed to have most Tesla-related communications handled by a lawyer before tweeting lest he say anything that would affect the stock price.
In September 2022, Musk’s attorneys filed a brief with an appeals court to rid the executive branch of a “government-imposed gag” that “hinders.”[s] and chill[s] Mr. Musk’s lawful speech.” This was a month after a federal judge overturned Musk’s motion to terminate the same SEC settlement provision.
Earlier this week, Musk’s attorneys 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” are suing the executive for damages.
“Given the jury’s finding that Mr. Musk’s tweets did not violate Rule 10b-5, the SEC lacks support for both the consent decree itself and his arguments on appeal,” Spiro writes. “The ruling provides another reason why the public interest in avoiding unconstitutional settlements easily subsumes the SEC’s alleged part in the consent decree.”
Attorneys may provide additional powers of attorney to an appellate court after filing a brief and before the court makes a decision if they find a new legal power of attorney that directly relates to the issue raised in the appeal and has the potential to change the outcome of the appeal If to affect.
The SEC dismissed Spiro’s argument, saying that a jury’s verdict in a private securities fraud lawsuit does not qualify as “relevant and significant” authority. The agency also argued that Musk “waived his opportunity to test the commission’s allegations in court when he voluntarily agreed (twice) to a consent verdict.”
The agency argued that the ruling does not address the public interest in the negotiated settlement and does not prevent Musk from tweeting concisely about Tesla or anything else. Lawyers for the SEC also questioned the legal basis for overturning the settlement years later.
The court can either accept Spiro’s letter or strike it down. A hearing for the appeal is expected in the spring, but a date has not yet been set.
