Tesla Inc Chief Executive Elon Musk asked a federal judge to terminate his 2018 agreement with the top U.S. securities regulator. Musk also asked the judge to block a U.S. Securities and Exchange Commission (SEC) subpoena requesting records of pre-approval of a Twitter poll he conducted in November.
Musk’s lawyers wrote to U.S. District Judge Alison Nathan in Manhattan that the SEC’s pursuit of Mr. Musk has crossed the line into harassment. Musk’s lawyers said that the 2018 consent decree resolving SEC securities fraud charges should not allow roving and unbounded investigations into the outspoken government critic. This is while impeding his constitutional right to free speech. Musk’s push to end the consent decree may fail.
Urska Velikonja, a law professor at Georgetown University Law Center said that the SEC clearly has authority to enforce a consent decree issued by a federal court. This is without having to conduct a new investigation. Also, she added that apart from concerns that the consent decree is overbroad and difficult to enforce.
In early November, Musk posted on Twitter that he would offload 10% of his Tesla stake if users approved. A majority did, and the poll sent Tesla shares into a slump. Musk has since sold $16.4 billion of stock. The tweet renewed questions about whether Musk complied with his SEC agreement to obtain approval from a Tesla lawyer before issuing written communications about information material to his company or its shareholders. Musk faces a real uphill fight, according to Stephen Crimmins. He also said that the courts generally give the SEC a lot of leeway to enforce subpoenas.
The regulator sued Musk after he tweeted in August 2018 that he had funding secured to potentially take his electric-car company private at $420 per share. In reality, a buyout was not close. Tesla and Musk settled by agreeing to each pay $20 million in civil fines.
Musk told Nathan in a separate court filing that he never lied to shareholders. He entered into the consent decree for the survival of Tesla. In his filing, Musk said he was forced to sign the decree. The SEC’s action stood to jeopardize the company’s financing. He said that Tesla’s investor relations teams said at that time that several large shareholders could cede their ownership in Tesla. The company accused the SEC of exploiting the consent decree to micro-manage Mr. Musk’s Twitter activity and retaliate against him for criticizing the agency. Musk has also mocked the agency in his tweets since the 2018 probe that the SEC, three letter acronym, middle word is Elon’s. He also tweeted in 2020 that Tesla would make short pants in radiant red satin with gold trim and send them to the SEC. This he called the shortseller enrichment commission.