Elon Musk never sought approval for a single Tesla tweet the US SEC tells judge

(Reuters) – the Chief Executive Elon Musk has never sought a pre-approval for a single tweet about Tesla Inc since striking a court-approved deal about the communication of important information about the electric car maker, the top U.S. securities regulator told a judge on Monday.

FILE PHOTO: Tesla CEO Elon Musk attends the Tesla Shanghai Gigafactory groundbreaking ceremony in Shanghai, China, January 7, 2019. REUTERS/Aly Song

The Securities and Exchange Commission is doubling down on the government the question to the Tesla CEO in contempt of an earlier fraud scheme, obliged him to the company in advance to approve any tweets that may have a material impact on the automaker.

The ongoing public battle between Tesla’s chief executive and the SEC posts press Musk, the face of Tesla, who is struggling to make the company profitable after the price cut of the Model, the 3 sedan to $35,000.

The SEC said Jan. 19 tweet that Musk, he sent more than 24 million followers on Twitter to claim that the electric car-maker would build around the 500,000 cars in 2019 was “a flagrant violation” of the agreement.

The SEC asked Tesla in late February or Musk’s tweets had been pre-approved since that policy was adopted, according to the filing in the federal district court in Manhattan.

Tesla answered, after more than two weeks, to say simply: “No.”

“It is therefore wonderful to learn that, at the time of filing of the instant motion, Musk had not sought pre-approval for one of the many tweets about Tesla, he published in the months since the court’s pre-approval policy in force,” the SEC said in the filing.

The regulator last month claimed that Musk had violated the September settlement of fraud charges by tweeting material information about Tesla, without the prior approval of the company.

In response, Musk had argued that his “single, immaterial” tweet in accordance with the settlement, and that the SEC’s push to find him in contempt infringement on his freedom of expression.

Lawyers for Musk said the tweet paid to the company the communication of the policy for the senior management and was a “proud and optimistic approximation of the information which is made public.”

The SEC said on Monday, submitting that the pre-approval policy agreed to in the settlement was designed to provide a wide range of reactions, not just those that were deemed material by the supervisor of the standards.

The fraud settlement between Musk, of Tesla and the SEC resolved in a lawsuit brought by the supervisor of the claims Musk made on Twitter in August that he had “funding” to take Tesla private $420 per share. The SEC called those tweets “false and misleading” and a go-private deal is never completed.

As part of this settlement, Musk stepped down as the company’s chairman, and he and Tesla agreed to pay $20 million in fines.

Tesla has backed off a plan to close all of its U.S. stores and said it will instead increase the prices of the more expensive vehicles by about 3 percent on average. Last week, Tesla unveiled its Model Y crossover SUV, aimed to start production in 2020.

Musk called the controller in the Shortseller Enrichment of the Commission” on Twitter after the settlement, and tweeted that “something is broken with SEC supervision” a day after the agency began with the contempt order.

Legal experts have said that the SEC could pursue several avenues, including a higher fine is imposed, further restrictions on Musk activity or remove him from the Tesla board of directors or the rudder.

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Tesla published a new communication strategy in December for senior executives as part of the settlement. It called for Tesla’s general counsel and recently appointed in-house securities lawyer to pre-approve any written statements about Tesla that could be material.

A disclosure controls committee composed of members of the board Brad Buss, Antonio Gracias, and James Murdoch, was charged with the supervision on the compliance of the new policy.

The case is the AMERICAN SEC v Elon Musk, the U. S. District Court for the Southern District of New York, No. 1:18-cv-8865-AJN-GWG

Reporting by Alexandria Sage in San Francisco and Ismail Shakil in Bengaluru; Editing by Lisa Shumaker

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