Elon Musk has agreed to settle the securities fraud charge by the U.S. Securities and Exchange Commission (SEC) in a settlement that includes removing Musk as chairman at Tesla, and Musk and Tesla paying fines, the SEC said on Saturday in what analysts see as one of the fastest such settlements.
Last Thursday, the SEC charged Musk with securities fraud for the infamous tweets about taking Tesla private at $420 per share and for claiming "funding secured" for a potential deal. The SEC was seeking to prohibit Musk from serving as an officer or director of a public company. The complaint "alleges that Musk violated antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company," the SEC said on Thursday when it filed the complaint at court.
On Saturday, the SEC said that it also charged Tesla the same day "with failing to have required disclosure controls and procedures relating to Musk's tweets, a charge that Tesla has agreed to settle."
Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC's allegations. Under the settlements, which are contingent on court approvals, Musk will step down as Tesla chairman and will be replaced by an independent chairman. Musk won't be eligible to be re-elected as chairman for three years. Musk and Tesla each will pay a penalty of US$20 million, with the total US$40-million penalties to be "distributed to harmed investors under a court-approved process."
The settlement also requires Tesla appointing two new independent directors, and Tesla setting up a "new committee of independent directors and put in place additional controls and procedures to oversee Musk's communications." Related: Bioscience Breakthrough Turns Plant Waste Into Gasoline
"As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla's board will adopt important reforms -including an obligation to oversee Musk's communications with investors-and both will pay financial penalties," Steven Peikin, Co-Director of the SEC's Enforcement Division, said in the SEC statement. "The resolution is intended to prevent further market disruption and harm to Tesla's shareholders."
According to analysts, the settlement is probably the best thing for both the SEC and Musk and Tesla, because the SEC is showing it can act to enforce change in protecting shareholders, while Musk-removed as chairman-will keep its CEO role at Tesla: a role analysts and Tesla believers see as crucial for the company.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More