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Elon Musk-Twitter Deal Highlights SEC’s Bitter-Sweet Relationship With the Billionaire Over the Years

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US securities regulators have pulled their punches in dealings with Elon Musk largely because an April 2019 court hearing on a statement he made about Tesla on Twitter didn’t go their way, according to four sources with knowledge of the matter.

The US Securities and Exchange Commission (SEC) asked the court to hold the billionaire in contempt, saying a tweet by the Tesla CEO – which forecast production at the carmaker – violated a court agreement Musk signed the previous year to have some of his communications vetted by a lawyer.

By trying to rein in his comments, the SEC was veering into relatively uncharted territory. SEC rules require that public companies and their executives disclose accurate information that may be material to investors via channels that investors know to monitor. It doesn’t usually specify how companies should do that.

But the 2019 remarks by judge Alison Nathan – who found the terms of the agreement between Musk and the SEC to be “soft” and urged them to reach an understanding – knocked confidence among officials overseeing the case that the courts would support them if they attempted to prosecute his activity on Twitter, the four sources said.

Interviews with individuals familiar with the situation – as well as a review of court documents, SEC and Tesla emails obtained by the media through a public records request – showed that in the wake of Nathan’s comments, SEC officials opted to urge Musk to comply with the agreement, rather than pursuing enforcement through the courts.

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Spokespeople for the SEC declined to comment on its enforcement dealings with Musk. Spokespeople for Tesla and Twitter and a representative for Judge Nathan did not respond to requests for comment for this story.

Musk’s attorney, Alex Spiro, did not respond to requests for comment on the SEC’s deliberations, but court records and Tesla emails show he and other lawyers for the Tesla boss dispute that Musk’s tweets violated the agreement.

With Musk’s use of social media under scrutiny after he bid to purchase Twitter, the interviews and documents shed light on the regulator’s view of its relationship with the billionaire, now the world’s richest man. He has 95 million Twitter followers and called the SEC “bastards” in an interview in April.

The sources said they are not familiar with the current thinking of the SEC, which has been under new leadership since US President Joe Biden took office in January 2021. Under new Chair, Gary Gensler, the agency has pledged to crack down on repeated misconduct and push for tougher penalties.

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It recently opened more investigations into Musk. Among them, a probe into two of his November tweets asking if he should sell shares in Tesla, court documents regarding Musk’s settlement with the SEC show.

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Nathan was promoted to the New York-based 2nd US Circuit Court of Appeals in March. A newly assigned judge in the case, Lewis Liman, ruled in the SEC’s favor last month.

“Material information”

The SEC’s fight with Musk started on August 7, 2018, when the CEO, whose company had been telling investors to monitor his Twitter feed since 2013, sent Tesla shares soaring by tweeting “funding secured” to take the publicly listed company private. The SEC opened an investigation: It found Musk at the time had not even discussed key deal terms with any potential funding source, SEC court filings later showed.

Musk says funding was secured.

In September 2018, agency officials told Musk he had a choice: Fight stiff charges over the tweet in court or settle and suffer lesser penalties, one of the sources said. Tesla shares were around $300 (roughly Rs. 23,200) compared with more than $630 today (roughly Rs. 48,800) after a five-for-one stock split in 2020. Musk agreed to settle.

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During the April 4, 2019 hearing, in comments to the SEC about the settlement’s language on what tweets should be vetted, Nathan said, “This case is unusual.” Her exploration of the terms of the settlement has not previously been reported in detail.

The settlement required Tesla to establish a process for overseeing all of Musk’s communications about the company, including hiring or designating an “experienced securities lawyer” to vet social media posts. Musk also agreed that he would certify in writing that he had complied, and provide proof; and to step down as Tesla chair while remaining CEO. No end-date was set for the arrangement.

The vetting process required that Musk seek pre-approval for written communications – including tweets – that contained “or reasonably could contain” information material to Tesla shareholders.

But the decision on whether they contained material information was left to Musk and Tesla.

Less than six months later, on February 19, 2019, Musk tweeted that Tesla would make “around 500k” cars that year. If unvetted, this was arguably a violation of the settlement because production figures can be market sensitive information, SEC officials said in court filings.

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The SEC staff asked Tesla whether Musk had submitted the tweet for vetting. He had not, Tesla attorneys told the SEC. The SEC said in the court complaint that when it looked into the Feb. 2019 tweet, it found Musk had not sought pre-approval for any Tesla-related tweets since the vetting system started. Its attorney told the court, “Mr. Musk has tweeted upward of 80 times about Tesla, and the SEC thought nothing of it. We assumed that everyone was proceeding in good faith.”

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Tesla attorneys said in a court filing Musk had not sought pre-approval because he “has not tweeted material information regarding Tesla.”

“Reasonableness pants”

For SEC officials, Musk’s violation was clear, four of the sources told Reuters.

In April 2019 they went to the New York court to argue that Musk should be held in contempt of court – a serious charge that can result in fines or jail. The SEC wanted the court to order Musk to report monthly to the agency on his compliance and enforce escalating fines for violations, its lawyer told the judge at the hearing.

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SEC officials felt they had the upper hand because they believed the violation was unambiguous, said the four sources, two of whom have direct knowledge of the matter.

Following a 1976 Supreme Court ruling, the SEC’s rules have defined material information that a public company must disclose as matters “a reasonable investor” would likely consider important. The regulator’s requirement in the deal with Musk was broader than that, it told the court: “We would argue it essentially means unless something is obviously immaterial, it needs to get pre-approval.”

Musk’s lawyers told the court the SEC’s interpretation of the settlement’s vetting requirements was “incorrect” and “overbroad.”

Judge Nathan challenged what she described as the settlement’s “soft” standard for assessing when a tweet was material, the court transcript shows; she also agreed with Musk’s lawyer that the SEC should have tried to resolve the issue out of court, saying, “This screams of working it out.”

Nathan did not conclude whether the tweets were material, or rule on the contempt motion, saying: “My call to action is for everybody to take a deep breath, put your reasonableness pants on, and work this out.”

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SEC officials felt they had no choice but to revise the settlement, according to the four sources. The SEC, Tesla and Musk agreed to be more specific about what comments must be pre-approved – including statements about Tesla’s financial condition, proposed or potential deals, production numbers, and performance projections.

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Nathan approved that revised agreement on April 30, 2019.

The tweets go on 

In the following months, SEC officials felt Musk pushed the boundaries of the revised settlement but were reluctant to return to court, fearing Nathan might reject their complaint and admonish them for bringing the issue back, three sources said.

On July 29, 2019, Musk tweeted that he was hoping to manufacture “1,000 solar roofs” a week by year-end; and on May 1, 2020 that Tesla’s stock price was “too high.” Each tweet prompted the SEC to contact Tesla and Musk’s attorneys seeking information on whether they had been pre-approved, according to SEC correspondence sent to Tesla on the matter obtained by public records requests.

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Musk had not sought pre-approval; Tesla’s attorneys argued in the emails to the SEC it wasn’t necessary. The regulator disagreed. The SEC said in emails it was trying to work out the dispute “in the spirit of the Court’s directive” but that Tesla and Musk’s attorneys had declined to provide requested documents, or have a “productive dialogue” with SEC staff.

In June 2020, the SEC emailed Musk advising him it was the “SEC’s position that you violated” the settlement.

Instead of returning to court, however, the SEC said: “Going forward, we urge you to comply.”

Some SEC officials felt the settlement constrained Musk to some degree, which helped protect investors, said the four sources.

The SEC also was uneasy about the risks of the most extreme step – scrapping the deal and starting litigation – given Musk’s resources, four of the sources said.

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In addition, Musk was and remains Tesla’s largest shareholder, with roughly 16 percent of the stock as of late April, so it might be hard to argue that barring him as a public company director or officer was in shareholders’ interests or would loosen his grip on Tesla, two of the sources said.

In March, Musk asked the court to void his settlement with the SEC.

The new judge in the case, Liman, rejected Musk’s appeal in April. He found the billionaire was “bemoaning” the 2018 deal now that he felt Tesla was “invincible”. A representative for the court said Liman would not comment.

© Thomson Reuters 2022


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What Are WhatsApp Polls and How Do You Use Them? All You Need to Know

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WhatsApp’s new features and updates which have rolled out over the past few months have made the messaging experience much better. Now, WhatsApp users can even create polls in personal and group chats to see what their friends and contacts think. Both iOS and Android users can use this feature. A poll could help take the opinions of group members on any topic or idea, or could be useful for making plans quickly. Just like your chats, the responses you send to a poll question will be protected by end-to-end encryption. At the moment, Telegram and Facebook Messenger allow group polls. You can easily start using this new WhatsApp feature on your smartphone.

Here is How to Create a WhatsApp Poll

Step 1: Update WhatsApp to the latest version

Step 2: Open the private or group chat in which you want to create a poll

Step 3: For Android, tap on the paper clip icon at the bottom of the screen. For iOS, select the plus (+) icon at the bottom of the screen.

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Step 4: Select ‘Poll’

Step 5: Type the question you want to ask, along with response options

Step 6: Finally, tap on ‘Send’ to share the poll

Up to twelve response options can be offered to recipients for each poll, and these are not time-bound. Users can also see the responses selected by others by tapping on ‘View votes’.

The Meta-owned messaging app has recently worked on several updates, rolling out new tools including the Call Link feature, the ability to message yourself, and Companion Mode. While some of these new features are not available to all users at the moment, WhatsApp does plan to make them accessible to everyone in the coming days. The most recent and talked-about feature apart from WhatsApp polls is Communities. These allow users to have separate groups under one “Community” to organize large conversations.

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“With Communities, we’re aiming to raise the bar for how organizations communicate with a level of privacy and security not found anywhere else. The alternatives available today require trusting apps or software companies with a copy of their messages – and we think they deserve the higher level of security provided by end-to-end encryption,” stated WhatsApp in a blog post.

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Elon Musk Calls Donald Trump’s Twitter Ban ‘Grave Mistake’, Condemns Violence

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Twitter’s ban on then President Donald Trump after January 6, 2021, attack on the US Capitol by his supporters was a “grave mistake” that had to be corrected, Chief Executive Elon Musk said on Friday, although he also stated that incitement to violence would continue to be prohibited on Twitter.

“I’m fine with Trump not tweeting. The important thing is that Twitter correct a grave mistake in banning his account, despite no violation of the law or terms of service,” Musk said in a tweet. “Deplatforming a sitting President undermined public trust in Twitter for half of America.”

Last week, Musk announced the reactivation of Trump’s account after a slim majority voted in a Twitter poll in favor of reinstating Trump, who said, however, that he had no interest in returning to Twitter. He added he would stick with his own social media site Truth Social, the app developed by Trump Media & Technology Group.

Republican Trump, who 10 days ago announced he was running for election again in 2024, was banned on January 8, 2021, from Twitter under its previous owners.

At the time, Twitter said it permanently suspended him because of the risk of further incitement of violence following the storming of the Capitol. The results of the November 2020 presidential election won by Democrat Joe Biden were being certified by lawmakers when the Capitol was attacked after weeks of false claims by Trump that he had won.

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Trump repeatedly used Twitter and other sites to falsely claim there had been widespread voter fraud, and had urged supporters to march on the Capitol in Washington to protest.

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The attack is being investigated by US prosecutors and a congressional committee.

Twitter did not immediately respond to a request for comment on Friday on Musk’s statement that Trump did not violate any Twitter terms of service when his account was suspended.

Earlier on Friday, Musk tweeted that calling for violence or incitement to violence on Twitter would result in suspension, after saying on Thursday that Twitter would provide a “general amnesty” to suspended accounts that had not broken the law or engaged in spam.

Replying to a tweet, Musk said it was “very concerning” that Twitter had taken no action earlier to remove some accounts related to the far-left Antifa movement. In response to another tweet asking if Musk considered the statement “trans people deserve to die” as worthy of suspension from the platform, the billionaire said: “Absolutely”.

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Change and chaos have marked Musk’s first few weeks as Twitter’s owner. He has fired top managers and it was announced that senior officials in charge of security and privacy had quit.

© Thomson Reuters 2022


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WhatsApp Reportedly Testing Voice Status Update for iOS Beta: All Details

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WhatsApp, the Meta-owned instant messaging app, is reportedly working on a feature that will let iOS users share voice notes in their status updates. As of now, the users can only share pictures, videos and links in their WhatsApp status. However, once the new feature will be rolled out, WhatsApp users on iOS will be reportedly able to share voice notes or voice clips as well in their status updates on the app. According to the report, the messaging platform is testing the feature on iOS Beta for an upcoming update.

According to a report by WhatsApp development tracker WABetaInfo, WhatsApp users on iOS will be able to share a voice note of up to 30 seconds alongside text in their status updates, similar to what they can currently do in a WhatsApp chat.

The report has also shared a screengrab of the same, hinting at the upcoming feature, which shows a microphone icon on the bottom of the text status.

WhatsApp on iOS users will be required to click on the microphone icon and record their voice to upload it as their status update. They can even add text to it, if needed. It is worth noting that the voice status updates will only be shared with the people selected in the privacy settings. Also, these voice notes will always be end-to-end encrypted.

Not only iOS, but this ability is said to be also being tested in WhatsApp beta for Android’s upcoming update. As of now, this feature is still under development, so it would be very early to say anything.

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Meanwhile, WhatsApp recently rolled out WhatsApp Polls to users on both Android and iOS. The Polls feature was introduced alongside ‘Communities’, a feature that allows users to have separate groups under one umbrella to organise group conversations. WhatsApp Polls lets users create polls within the group with the ability to vote. Facebook Messenger and Telegram currently allow users to add group polls. WhatsApp’s poll feature will be protected by end-to-end encryption.

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