The United States Securities and Exchange Commission (“SEC”) has filed court papers seeking to compel Elon Musk to comply with a SEC Subpoena requiring him to appear for sworn testimony, to which the SEC alleges Musk has failed to comply.
In the event an individual or company does not comply with a subpoena issued by counsel for the SEC’s Division of Enforcement per a formal order of investigation, the SEC may initiate a federal court subpoena enforcement action to compel compliance by the individual or legal entity. That is precisely what happened here.
In its subpoena enforcement filing, the SEC alleges that the SEC subpoena for testimony issued to Elon Musk concerns an ongoing SEC investigation into possible violations of certain provisions of the federal securities laws with respect to: (1) Musk’s 2022 acquisition of Twitter, Inc. (“Twitter”) stock, and (2) Musk’s 2022 public pronouncements and SEC filings concerning Twitter. The SEC is looking to compel Musk to appear and testify so that it can obtain information not currently in its possession that may be of value in its ongoing investigation.
Per the SEC’s Court filing, Musk did not appear for testimony as called for by the SEC’s investigative subpoena, even though he: (1) was served with a SEC subpoena that called for his testimony to take place on a mutually agreed date; and (2) failed to raise any objection to the SEC subpoena until just two days prior to the scheduled, agreed-upon testimony date, at which time he advised the SEC that he would not show up. For his part, Musk sought to justify his decision to not comply with the SEC subpoena by advancing numerous objections for the first time shortly before he was set to appear, per the SEC’s filing. The SEC characterized Musk’s objections as “spurious.”
The SEC’s objective in this legal exercise is to obtain a Court order compelling Elon Musk to comply with the SEC subpoena and to provide sworn testimony to the SEC enforcement staff. The judge will ultimately make a decision on this issue.
In its litigation release, the SEC was careful to note that its fact-finding investigation is ongoing and that, at this point in time, it has not reached any conclusion that any person or entity has committed a violation of the federal securities laws.
As I have written in previous blogs on this topic, typically no good comes from a legal challenge to the enforcement of a SEC subpoenas, as the SEC possesses broad and extensive legal authority to conduct its investigations, which includes requiring individuals, per subpoena, to appear and testify under oath on the record. Courts typically side with the SEC and enforce compliance with the subpoena. Accordingly, Musk will likely lose this legal battle and, in the process of filing his challenge, will have made public an SEC investigation that would have otherwise remained non-public and confidential, perhaps never to have been known if the SEC concluded its investigation without taking enforcement action. But then again, Musk may have his own strategic reasons for doing so.
SEC Defense Attorney David Chase
David Chase, Esq. of the Law Firm of David R. Chase, a former SEC Enforcement Attorney, is now an SEC subpoena defense attorney and represents individuals in SEC fraud investigations nationwide. You may contact him toll-free at: 800-760-0912 or e-mail at: firstname.lastname@example.org, and can visit the Firm’s website for more information and content at: www.davidchaselaw.com.