Elon Musk reached an agreement on Saturday (29) with the SEC, the US Securities and Exchange Commission. In order not to be prosecuted for fraud, he will step down as chairman of Tesla’s board of directors, but will remain CEO. In addition, he will pay a $ 20 million fine, and will have a lawyer to monitor his tweets.
The SEC sued Elon Musk for fraud, accusing him of manipulating Tesla’s stock price. He tweeted that he had “guaranteed financing” to get the company off the stock exchange at $ 420 a share, but then backtracked. The agency had tried to make an out-of-court settlement, but the executive refused at the last minute.
After being sued, Musk accepted a deal with the SEC. He is expected to leave the chairmanship of Tesla’s board in 45 days, and will be ineligible for the post for the next three years. The company needs to appoint two new independent directors, not associated with Musk; and the new chairman of the board is also expected to be independent.
Musk will pay a $ 20 million fine that will be “distributed to aggrieved investors following a court-approved procedure”, according to the SEC. Tesla will pay an additional $ 20 million for the same purpose.
In addition, the company will hire a lawyer to monitor Musk’s communications, including his tweets. The SEC accused Tesla of “not having mandatory disclosure controls and procedures related to Musk’s tweets”.
Lawsuit against Elon Musk would have been worse
If the case had gone to court, the consequences for Musk could have been much greater. The SEC wanted to ban him from serving as a director or CEO of any publicly traded company (that is, on the stock exchange). This could impact the future of Tesla and other companies, such as SpaceX and Boring Company.
However, not everything is resolved for Musk. The Justice Department is still investigating the attempt to remove Tesla from the stock exchange, and several shareholders have sued the CEO for losing money from the stock fluctuation after the tweet “guaranteed financing” – which the SEC described as “false and misleading”.
Tesla shares are up 16% before markets open, trading at $ 307.