Elon Musk and Tesla have settled with the SEC (Securities and Exchange Commission) after the watchdog sued the CEO over his “going private” comments.
As part of the settlement, Musk will step down as chairman of Tesla to be replaced by an independent chairman. Musk is barred from being chairman for three years, and will pay a US$20 million fine.
Tesla will appoint two new independent board members, establish a new committee of independent directors, and place additional controls over Musk’s communications. Tesla will also pay a US$20 million fine.
The money from the fines will be given to “harmed investors” under court supervision.
Neither Tesla or Musk have admitted, nor need to admit, guilt.
“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” said Stephanie Avakian, co-director of the SEC’s Enforcement Division.
The SEC complaint against Musk reads: “Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote.”
It also alleged: “In truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.”