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Elon Musk seeks to end SEC 'muzzle' requiring pre-approval of tweets

Stock Markets Sep 28, 2022 08:25AM ET
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© Reuters. FILE PHOTO: Elon Musk's Twitter profile is seen on a smartphone placed on printed Twitter logos in this picture illustration taken April 28, 2022. REUTERS/Dado Ruvic
 
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By Jonathan Stempel

NEW YORK (Reuters) -Elon Musk's lawyers urged a federal appeals court to throw out a provision in his 2018 consent decree with the U.S. Securities and Exchange Commission (SEC) requiring a Tesla (NASDAQ:TSLA) Inc lawyer to vet some of his posts on Twitter (NYSE:TWTR).

In a brief filed late on Tuesday with the 2nd U.S. Circuit Court of Appeals in Manhattan, lawyers for Musk called the pre-approval mandate a "government-imposed muzzle" that inhibited and chilled his lawful speech on a broad range of topics.

They also said the requirement violated the U.S. Constitution, and undermined public policy by running "contrary to the American principles of free speech and open debate."

The SEC declined to comment on Wednesday. It is expected to file its own brief with the appeals court.

Musk wants to overturn part of an April 27 decision by U.S. District Judge Lewis Liman that rejected his bid to throw out the consent decree altogether.

Liman said Musk's arguments amounted to a "bemoaning" of requirements he no longer wanted to adhere to now that "his company has become, in his estimation, all but invincible."

Musk, 51, is worth $259.8 billion, nearly twice as much as anyone else, Forbes magazine said on Wednesday.

The decree resolved a lawsuit accusing Musk of defrauding investors with a Aug. 7, 2018 tweet that he had "funding secured" to take his electric car company private, though a buyout was not close. Musk has said the tweet was truthful.

In settling, Musk agreed to let a Tesla lawyer screen tweets that might contain material information about the company.

He and Tesla each also paid $20 million in civil fines, and Musk gave up his role as Tesla chairman.

But the SEC later opened a probe and subpoenaed documents concerning Musk's and Tesla's compliance, after Musk asked his followers in a Nov. 6, 2021 tweet whether he should sell 10% of his Tesla stake to cover tax bills on stock options.

In Tuesday's filing, Musk's lawyers said it was time to rein in the SEC, which is keeping him under "constant threat" it might reject his view of which disclosures require pre-approval.

"Under the shadow of the consent decree, the SEC has increasingly surveilled, policed, and attempted to curb Mr. Musk’s protected speech that does not touch upon the federal securities laws," the lawyers wrote. "Any objective served by the pre-approval provision has been served."

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

Twitter has sued Musk to force him to complete the merger at the agreed-upon price, which is 23% higher than where its shares closed on Tuesday. An Oct. 17 nonjury trial is scheduled in Delaware Chancery Court.

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

Elon Musk seeks to end SEC 'muzzle' requiring pre-approval of tweets
 

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