Sept 30, 2018 (LBO) – The United States Securities and Exchange Commission announced today that Elon Musk, CEO and Chairman of Silicon Valley-based Tesla, has agreed to settle the securities fraud charge brought by the SEC against him last week.
The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla has agreed to settle.
The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Tesla.
Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. Among other relief, the settlements require that:
– Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
– Tesla will appoint a total of two new independent directors to its board;
– Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;
– Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
“As a result of the settlement, Tesla’s board will adopt important reforms including an obligation to oversee Musk’s communications with investors,” said Stephanie Avakian, Co-Director of the SEC.
“The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”