(Bloomberg) — The US Securities and Exchange Commission sent a query last month to Elon Musk over 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.
The SEC requested information from Musk about the timing of his disclosure and the type of filing he made, according to a letter dated April 4 that the SEC released Friday. The regulator asked Musk why it “does not appear to have been made within the required 10 days from the date of acquisition as required.”
Musk disclosed on April 4 that he acquired more than 9% of the company, a week later than regulations allow and by using a filing typically reserved for passive investors. He has since embarked on a highly public $44 billion 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 indicated that the billionaire crossed the threshold on March 14, and he initially said so on a form 13G for passive investors, rather than the filing for activist investors. Musk filed a form 13D, used for active investors, the day after the SEC sent its April 4 letter.
The SEC declined to comment on the filing, as did a spokesman for Twitter. An attorney for Musk didn’t respond to a request for comment.
The scrutiny comes as SEC Chair Gary Gensler has been pressing to tighten rules for how investors must disclose that they have taken a major stake in a company. The SEC chief has called for more transparency, and earlier this year proposed cutting the maximum time that an investor has to reveal they had taken a significant position.
The filing delay isn’t the sort of thing the SEC would normally enforce with heavy penalties, said Ann Lipton, a professor at Tulane University’s law school who specializes in corporate governance and securities law. “That said, Gary Gensler has been openly concerned about filing these late because he views them as a form of insider trading,” she said.
The SEC has repeatedly sparred with the Tesla Inc. CEO, and was already investigating whether he and his brother violated insider-trading rules when selling shares in the electric-car maker late last year — something Musk has denied. He’s also fighting the regulator in court over fallout from his infamous tweet saying that he had secured funding to take Tesla private.
The manner in which Musk disclosed his Twitter stake is also the subject of several investor lawsuits.
Musk has sought to frame his attempt to purchase the platform as a free-speech crusade. In its letter, the SEC also asked Musk to explain his statements questioning whether Twitter “rigorously adheres” to free-speech principles.
(Updates with information about Musk filings, comments starting in fourth paragraph.)
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