Elon Musk told by US regulators to abide by deal to have tweets pre-approved

Elon Musk
The SEC said the billionaire's objections were "frivolous". Photo credit: Getty Images

The ongoing battle between Elon Musk and the Securities and Exchange Commission (SEC) in the US over his tweets has continued with a new legal filing from the regulators.

It follows controversial billionaire Musk's appeal to a US District Court judge to quash a judgement that cost both him and Tesla US$20 million each, as well as requiring his tweets about the company to be pre-approved.

The Tesla CEO insisted his company was being subjected to "endless, unfounded investigations", which recently included a subpoena investigating possible insider trading involving Musk and his brother Kimbal.

In their last filing, Musk and his lawyers said he only signed the original 2018 settlement because not doing so would have had a negative impact on his businesses, with "several of Tesla's largest shareholders" potentially ditching their shares.

However the SEC has urged the judge to reject the argument, saying Musk's objection to the subpoena was "frivolous" and was both "procedurally defective and substantively meritless", according to the court filing.  

"When it comes to civil settlements, a deal is a deal, absent far more compelling circumstances than are here presented," the SEC wrote.

The agency maintained it had the legal authority to subpoena both Tesla and Musk about his tweets and said the company had not objected to the subpoena and was instead producing documents.

"Musk has agreed to produce documents responsive to some categories in the subpoena to him, but his counsel informed the SEC staff on February 25, 2022 that Musk would not produce any documents regarding pre-approval or review of his tweets," the SEC wrote.

It further argued Musk's allegations of bad faith were "wholly without merit".

"Musk argues that the subpoena is improper because the SEC may only obtain documents touching on conduct related to the SEC v Musk case through subpoenas issued under the authority of this Court. He is wrong.

"Second, Musk contends that the SEC is engaging in a campaign of 'harassment'. This assertion is baseless. Musk complains about the 'sheer number of… demands' by the SEC. But a review of this list of 'demands' fails to support such a conclusion," it said.

It also firmly denied that Musk's tweets requiring pre-approval was a violation of his First Amendment rights of free speech, saying it relied on the "false premise" that it was the Court or the SEC who would pre-approve them.

Instead it was Tesla who was required to review and approve certain communications, it said.

"Second, this argument ignores the critical fact that Musk voluntarily consented to the entry of the court orders that established the pre-approval requirement. In the settlement context, defendants can choose to bargain away their rights."

The first settlement between Musk and the SEC followed the South African-born entrepreneur tweeting to his followers he was considering taking Tesla private at $420 a share and that funding had been secured.

That was a big premium on the value of each share at the time and the share price rose in response.

At the time, whether Musk was being serious or not was up for debate. Many took it as a joke, with '420' being a well-known reference to cannabis smoking, while some took it more seriously, urging Musk to change his mind.