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The Supreme Court rejects the question of the SEC’s “gag” rule



(Reuters) – The US Supreme Court on Tuesday rejected an appeal by a former Xerox Corp. chief and, with the support of Elon Musk, to a Securities and Exchange Commission ruling requiring people who agree to settlements with the agency not to deny its accusations against them.

The judges declined to hear former Xerox chief financial officer Barry Romeril’s appeal of a lower court ruling that the rule does not violate his freedom of expression under the First Amendment to the US Constitution. Mr Romeril agreed not to deny allegations of accounting fraud he made with the SEC in 2003.

Musk, Tesla Inc.’s CEO and the world’s richest person, is trying to conclude his own SEC deal in 201

8. Musk signed a legal assignment in April in support of Romeril.

Musk’s deal required a Tesla lawyer to review some of his Twitter posts, which resolved an SEC lawsuit accusing him of deceiving investors by tweeting that he had “secured funding” to take his electric car business privately, even though a acquisition was not close.

Defendants can dispute SEC allegations, but an agency policy dating back to 1972 says that when they settle without admitting wrongdoing, they must also agree not to contradict the agency’s results. If a defendant violates the settlement, the SEC can try to undo it and try the claims.

Critics have called it a “gag” rule. The SEC has said that dumping the rule would undermine its credibility and strain its resources by leading to more lawsuits.

Mr Romeril was one of six executives who solved allegations that Xerox had increased Xerox’s revenue by $ 1.4 billion by the end of the 1990s. He agreed to pay more than $ 5 million in fines and was permanently suspended from serving as a civil servant in a public company.

Mr Romeril made an attempt to repeal the ban from his 2019 agreement, which a Manhattan-based federal judge denied. He then argued to the New York-based 2nd US Circuit Court of Appeals that the judge never had the power to approve the settlement because it illegally violated freedom of expression.

The 2nd Circuit found last year that Romeril had waived his right to freedom of expression to avoid litigation, and rejected his argument that the agreement violated the first addendum.


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