Tuesday 12 March 2019 5:10 pm

'Serious First Amendment issues': Tesla CEO Elon Musk's lawyers slam SEC's latest attack on tweets

Lawyers for Elon Musk say that the US financial regulator's claims that the Tesla chief executive violated a previous settlement by posting a tweet has serious implications for First Amendment issues.

Read more: Regulator accuses Elon Musk of misleading investors with new Tesla tweet

The Securities and Exchange Commission (SEC) had asked a New York City court to hold Musk in contempt following a mid-February tweet he sent that claimed Tesla would produce 500,000 cars this year.

The commission has argued that the tweet constituted a violation of Musk's 2018 settlement with the SEC, which requires that Musk pre-approve any tweets that could contain shareholder information with a company lawyer.

Musk's lawyers argued that the boss had not violated the settlement, and that the tweet in question was a “proud reflection of Tesla’s progress” and contained information already shared with shareholders.

Per the order, Musk is allowed the discretion to decide whether or not a tweet needs to be vetted.

In a filing to the court, Musk's lawyers argued that the SEC's decision to hold Musk in contempt raises “serious First Amendment issues and implicate other constitutional rights”.

“The SEC seeks to rewrite the order to eliminate Musk’s discretion, effectively requiring Musk to seek pre-approval of any tweet that relates to Tesla, regardless of its significance, prior dissemination, or nature,” Musk's counsel said.

Musk's lawyers pointed to his reduced volume of tweets “generally and regarding Tesla in particular” as evidence that Musk has been complying with the 2018 settlement.

The SEC argued otherwise, citing Musk's 60 Minutes interview, in which he is critical of the SEC, as evidence that he is not abiding by the order.

Musk's counsel said in their filing that the “SEC’s heavy reliance on this interview in its motion for contempt smacks of retaliation and censorship”.

Musk first got into hot water for a tweet last year, which led to the settlement the SEC says he has violated.

In the previous tweet, published in August 2018, Musk stated that he planned to take Tesla private and had the funding secured.

The tweet saw Tesla's stock price rise, and in September the SEC sued Musk for fraud following an investigation that found that he did not having funding.

Read more: Why your boss should spend more time on Twitter

Musk settled with the SEC, paying a $20m (£15.2m) fine and stepping down from his position as chairman. As part of the settlement, Musk had to abide by a protocol to have tweets concerning Tesla's shareholders vetted by Tesla.

Musk's lawyers note that his most recent tweet differs from the 2018 offender in that it “did not cause any notable move in Tesla's stock price” and “was plainly not material to shareholders”.