Musk, Tesla settle with SEC in fraud case
CEO must step aside as chairman, pay $20 million fine
Elon Musk, Tesla’s chief executive, reached a deal with the Securities and Exchange Commission on Saturday to resolve a securities fraud case. The settlement will force Musk to step aside as chairman for three years and pay a $20 million fine.
The SEC announced the deal two days after it sued Musk in federal court for fraud and misleading investors over his post on Twitter last month that he had “funding secured” for a buyout of the electric-car company at $420 a share.
It is not clear why Musk changed his mind and agreed to settle, but shares of Tesla have been hit hard since the SEC filed the lawsuit. On Friday, the stock dropped about 13 percent.
The deal will allow him to remain as chief executive officer.
The terms are slightly tougher than those that two people briefed on the talks said Musk had rejected Thursday, which called for a two-year ban on serving as chairman and a $10 million fine.
Tesla, which is also settling, will pay a $20 million penalty.
The company will add two independent directors and take steps to monitor Musk’s communications with investors. It will also create a permanent committee of independent directors to monitor disclosures and potential conflicts of interest.
In settling, Musk neither admitted nor denied misleading investors under the civil fraud charge, which means he cannot later say he did nothing wrong. The company was not charged with any fraud.
“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.