© Tesla Electronics Production | October 01, 2018
Musk settles SEC fraud charges – agrees to pay penalties
Elon Musk has agreed to settle the securities fraud charge brought by the SEC against him last week, says the Securities and Exchange Commission.
The SEC says that it has also 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 the company including Musk’s removal as Chairman of the Tesla board and the payment by Musk and Tesla of financial penalties. As previously reported by Evertiq, the SEC’s complaint against Musk revolves around a tweet which mas made by Musk on August 7, 2018, in which he states 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. The SEC’s complaint alleged that, 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. Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. The settlements require that Musk will step down as Tesla’s Chairman and be replaced by an independent Chairman. This means that Musk will be ineligible to be re-elected Chairman for three years. Tesla will also have to appoint a total of two new independent directors to its board and establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications. Musk and Tesla will also have to pay USD 20 million in penalty each. The USD 40 million in penalties will according to the SEC be distributed to harmed investors under a court-approved process.