The US Securities and Exchange Commission sent a query last month to Elon Musk about how he disclosed his major stake in Twitter Inc. - the clearest signal yet that the Wall Street regulator is scrutinizing his efforts to buy the social network.
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According to a letter from April 4, the SEC requested information from Musk about the timing of his disclosure and the type of filing he made. The regulators asked why Musk did not appear to have been made within the required 10 days from the date of acquisition. Musk said on April 4 that he acquired more than 9% of the company, a week later than regulations allow and by using a filing that is typically reserved for passive investors. He embarked on a highly public takeover bid.
The letter from the SEC's mergers and acquisitions office is focused on a form that investors must file when they accumulate more than 5% of a company. Musk s filing announcing his Twitter stake indicated that the billionaire crossed the threshold on March 14 and he initially did so on Form 13 G for passive investors rather than the filing for activist investors. Musk has been pursuing a highly public bid to buy Twitter.
The scrutiny comes as SEC Chair Gary Gensler has been pressing to tighten rules for how investors must disclose they have taken a major stake in a company. The SEC chief has called for more transparency, and earlier this year proposed reducing the maximum time that an investor must reveal they have taken a significant position.
Over the years the SEC has sparred with the Tesla Inc. chief executive officer and was already investigating whether he and his brother had violated insider trading rules when selling shares in the electric automaker late last year - something Musk denied. He has been fighting the regulators in court over the fallout from his infamous tweet that he had secured funding to take Tesla private.
The way in which Musk disclosed his Twitter stake is the subject of several investor lawsuits.
Musk tried to frame his attempt to purchase the platform as a free-speech crusade. In its letter, the SEC asked Musk to explain his statements about whether Twitter adheres to free speech principles. None of the Tech Routs isn't just Cyclical -- It is Well-Earned and Overdue.
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