Elon Musk has accepted the SEC’s deal to pay a fine of $20 million and step down as Chairman of Tesla
Musk will be allowed to stay on as CEO under the settlement, which requires court approval but leave his role as chairman of the board within 45 days. He will be unable to seek reelection for 3 years according to court filings.
He accepted the deal with the SEC ‘without admitting or denying the allegations of the complaint,’ according to a court document.
In a separate settlement, Tesla agreed Saturday to pay $20 million to settle claims it failed to adequately police Musk’s tweet.
‘The $40 million in penalties will be distributed to harmed investors under a court-approved process,’ the SEC said in a press release.
Tesla will also appoint two new independent directors to its board and institute a board committee to oversee Musk’s communication as part of its settlement deal.
Tesla spends nothing on advertisement as they depend on their charismatic leader’s large Twitter following of more than 20 million people to get critical information out.
A spokesperson confirmed Musk will be permitted to remain a member of the board.
The announcement from the SEC comes two days after the agency filed a lawsuit against Musk, claiming he misled investors. The suit centers on tweets Musk sent on August 7 in which he said he had secured funding to take Tesla private at $420 a share, causing the company’s stock to soar. He had not secured the funding, the SEC said.
The lawsuit sought to ban Musk from serving as an officer or director of any publicly traded company.
Musk called the SEC’s suit ‘unjustified.’
‘I have always taken action in the best interests of truth, transparency, and investors,’ he said. ‘Integrity is the most important value in my life and the facts will show I never compromised this in any way.’
Jay Dubow, a partner at Pepper Hamilton and a veteran of the SEC’s enforcement division, said it was ‘unusual’ that the SEC agreed to let Musk stay on as chief executive but exit the chairman role. Especially because the role of the CEO is more felt I the day-to-day of the company than the chairman role.
He suggested the SEC may have determined that removing Musk as CEO would cause more harm to Tesla’s share price, and thus harm investors.
Analysts seem to agree with the same estimation.
Still unclear is whether or not the Department of Justice will file criminal charges against Musk.
Tesla confirmed earlier this month that the DOJ was investigating whether Musk’s comments about taking his company private constituted criminal activity.
Dubow, the former SEC official, said he suspects nothing will come of it.