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Tesla's Musk asks judge to end SEC agreement on tweet approval

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Elon Musk

(Reuters) – Tesla Inc. Chief Executive Elon Musk on Tuesday asked a judge to terminate or modify a 2018 agreement with the U.S. securities regulator requiring some of his tweets to be vetted by a lawyer.

Mr. Musk also asked the court to block a U.S. Securities and Exchange Commission subpoena requesting records of pre-approval of a Twitter poll he conducted in November on potentially selling some of his stock.

"The SEC’s pursuit of Mr. Musk has crossed the line into harassment, which is quintessential bad faith," Mr. Musk's lawyers said in documents to the judge at the U.S. District Court for the Southern District of New York.

Mr. Musk's lawyers said the 2018 consent decree allowed the SEC's "roving and unbounded investigations" into the outspoken government critic while imposing restraints on exercising his constitutional rights on free expression.

In early November, Mr. Musk tweeted that he would offload 10% of his stake in the electric-car maker if users of the social media network approved. The poll, which won approval of a majority of respondents, sent Tesla shares slumping, and since then Mr. Musk has sold $16.4 billion worth of stock.

Mr. Musk's tweet renewed questions about whether he was in compliance with the 2018 deal that requires him to obtain approval from a lawyer before issuing written communications about information that is material to Tesla or its shareholders.

Tesla said on Tuesday that Mr. Musk's tweet on stock sales "is behavior the SEC should encourage: a CEO’s transparency with the public and shareholders about a proposed stock sale."

Mr. Musk will face a "real uphill fight" to persuade the court to terminate the 2018 agreement and block the SEC subpoena over his stock sales tweet, said Stephen Crimmins, partner at Murphy & McGonigle, New York.

"Courts generally give the SEC a lot of leeway to enforce subpoenas," said Crimmins, who is not connected to the case.

"Judges generally take the approach that if you agree to a consent decree, you're stuck with it. Saying you don't like the deal is not going to get you out of it."

The SEC did not immediately respond to a request for comment.

 

 

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