The U.S. Securities and Exchange Commission fired back at Elon Musk’s assertion of his constitutional right to free speech in his defense to the regulator’s claims that a pair of tweets he sent last month about Tesla Inc. violated restrictions on his social-media posts.
In a court filing Monday supporting a request that a judge hold Musk in contempt of court, the SEC said that Tesla’s chief executive “voluntarily waived” his First Amendment rights when the judge last year ordered him to “obtain pre-approval of written communications that contain or reasonably could contain material information” about Tesla.
The ongoing public battle between Tesla’s CEO and the top U.S. securities regulator adds pressure on Musk, the public face of Tesla, who is struggling to make the company profitable after cutting the price of its Model 3 sedan to $35,000.
The regulator last month alleged that Musk had violated a September settlement of fraud charges by tweeting material information about Tesla without pre-approval from the company.
In response, Musk had argued that his “single, immaterial” tweet was in compliance with the settlement, and that the SEC’s push to find him in contempt infringed on his free speech..
The fraud settlement between Musk, Tesla and the SEC resolved a lawsuit brought by the regulator over claims Musk made on Twitter in August that he had “funding secured” to take Tesla private at $420 per share. The SEC called those tweets “false and misleading” and a go-private deal never materialized.
As part of that settlement, Musk stepped down as the company’s chairman and he and Tesla agreed to pay $20 million each in fines.
He also agreed to submit written communications that could materially impact Tesla for pre-approval to the company before publishing them.
No pre-approval
“It is therefore stunning to learn that, at the time of filing of the instant motion, Musk had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered pre-approval policy went into effect,” the SEC said in Monday’s filing.
Tesla has backed off a plan to close all its U.S. stores and said it will instead raise prices of its higher-end vehicles by about 3 percent on average. Last week, Tesla unveiled its Model Y crossover, targeted to begin production in 2020.
Musk called the regulator the “Shortseller Enrichment Commission” on Twitter after the settlement, and tweeted that “something is broken with SEC oversight” just one day after the agency started pursuing the contempt order.
Legal experts have said the SEC could pursue multiple avenues, including a higher fine, imposing further restrictions on Musk’s activities or removing him from Tesla’s board or helm.
Tesla published a new communications policy in December for senior executives as part of the settlement. It called for Tesla’s general counsel and a newly designated in-house securities law attorney to pre-approve any written statements about Tesla that could be material.
A disclosure controls committee, made up of board members Brad Buss, Antonio Gracias and James Murdoch, was tasked with overseeing compliance with the new policy.
Reuters and Bloomberg contributed to this report.
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