Elon Musk Settles With SEC: Will Resign As Tesla Chairman, Pay $20 Million Fine

Tesla CEO Elon Musk and the Securities and Exchange Commission (SEC) have reached a settlement over the securities fraud lawsuit spawned by his infamous “funding secured” tweet.

According to the terms of the settlement, Musk will pay a $20 (£15.3 / €17.2) million fine and these funds will be “distributed to harmed investors under a court-approved process.” Musk will also be forced to step down from his position of as Tesla Chairman.

Musk will be replaced by an independent chairman who has yet to be named. This could only be temporary as the SEC says Musk’s ban on being chairman only lasts for three years. After that period, Musk could presumably be re-elected as Tesla chairman.

In related news, SEC also charged Tesla with “failing to have required disclosure controls and procedures relating to Musk’s tweets.” The complaint alleges that Tesla notified investors that Musk’s Twitter account would be used as a “means of announcing material information about Tesla,” but the company failed to have “disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings.” This effectively means that the company wasn’t vetting Musk’s tweets to ensure they complied with the law.

The SEC also said Tesla did not have “sufficient processes in place to [ensure] that Musk’s tweets were accurate or complete.” This is important as the SEC’s lawsuit against Musk stated he made a series of “materially false and misleading statements” about taking the company private and having secured the funding to do so.

Tesla has agreed to settle the complaint with the SEC and will appoint two new independent directors to its board. The company will also be required to “establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications.” This likely means an end to his off the cuff remarks which include calling a rescuer a “pedo” guy.

As part of Tesla’s settlement with the SEC, the company will pay a $20 (£15.3 / €17.2) million penalty. In similar fashion to the Musk settlement, those funds will be used to compensate investors.

In a statement, the Co-Director of the SEC’s Enforcement Division, Steven Peikin, said “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.” He went on to say, “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”

Musk will reportedly remain Tesla CEO and the settlements don’t require either him or Tesla to admit guilt.  Speaking of the settlements, both are still subject to court approval.

  • S CAT

    Finally! Hmmmm… ok, now there’s a chance I won’t absolutely despise Tesla going forward.

    • javier

      i know right, that guy is really really stupid for someone so smart

      • S CAT

        So true!

      • S3XY

        Totally. 100+ hour work weeks, CEO of 3 revolutionary companies changing our world. Forget all the stress he accumulates working that much and then vents via digital text on the Twitters causing no harm to any humans health!

        • Mike anonymous

          Well tweets can actually do a lot of damage, especially if one of those tweets (a few simple words) result in said tweeter breaking the law. (before you reply regarding it not really effecting shareholders, remember not ever shareholder of Tesla stock is some rich fancy pants who can afford to walk away easily if something were to happen (which I hope for their sake nothing bad does happen), but there are actual people at risk).

          But this entire situation is no ones fault but his own, he decided to say the things he said, he decides to do the things (i.e. his companies) he does. Unfortunately he has to take responsibility for the situation he put himself into.

        • BGM

          >revolutionary…

  • Six_Tymes

    well, i’m torn. on one hand Elon IS Tesla. On the other hand, he’s been doing some, lets just call them sketchy things lately.

    Now the question is, how will the stock perform in the next 10 business trading days.

    • S CAT

      Honestly, this is probably the best thing for the company. Musk has great ideas, but perhaps not a great manager/leader.

      • S3XY

        Musk is a fearsome leader. One that all other leaders fear. A Disruptor, doesn’t do things the way they’ve always been done and the way that everyone else does things. Best kind of leader. Managing…. could probably improve. Has so much going on

    • S3XY

      Tesla is about to have their best quarter ever. Model 3 sales are the charts. More demand than can produce.

    • eb110americana

      This will probably, notably hurt their stock short term. Assuming it doesn’t hurt them to the point that they fail to secure funding, eventually people will see that with Elon continuing as CEO, things shall continue as scheduled. The Model 3 will continue to outsell luxury cars in its class, and remain in high demand for the foreseeable future.

    • Dude

      The stock usually slips when there’s news about the possibility of him getting ousted as CEO but it’s been holding since the initial dip so I guess the chairman position doesn’t matter as much

  • Jay

    All fine and all but how much better or worse would his replacement be? Could be in downward spiral from here on out.

    • Mr. EP9

      He’s still CEO he is just not chairman of the board.

      • donald seymour

        Thanks for the clarification.

    • BGM

      We motorheads hope not, eh? Tesla should not only survive but thrive. We just want it to do it fairly and squarely, not with government subsidies and this motormouth at its head.

  • Nordschleife

    Well he’ll still be CEO. I get that means less power than what he had but he still has lots of power and influence. I don’t think it will be a huge difference. Since he is Tesla he still be blamed or exalted for whatever future issues Tesla will face.

  • Mr. EP9

    So Tesla will have to find a new chairman of the board in the meantime which no doubt will be one of Elon’s yes men. As for Elon? Perhaps he’ll control himself now……pfffttt, yeah right.

    Nothing more than a slap on the wrist and a wag of the finger.

  • Jason Miller

    I can think of worse things popping up on Twitter on a daily basis and they involve someone with orange skin. Maybe someone should go after him.

    • Mike anonymous

      let’s leave that stuff out of here. We’ve got enough tension in this comment section (of this article specifically) as it is.

      • BGM

        Some people can’t help themselves but be jerks.

        • Jason Miller

          People just can’t handle the truth.

  • S3XY

    Now that this is over with, back to the take over. Model 3 sales are astronomical. Legacy automakers are quacking in their boots. Scattering in their cave board rooms trying to make sense of all this. Model 3’s everywhere. Best sales quarter this month.

    • gambit gamboa

      Legacy automakers like who? Lamorghini? Whos gona buy POS Model S when they can have an aventador, sit down son.

      • BGM

        Don’t argue with fan fanboi troll, friend, that only feeds it.

        • Howfarr

          The fanboy literally writes his posts exactly like Elon writes his tweets.

    • Jason Panamera

      No. There are other companies that got real net worth, bigger profits and real value. You are just living in an imagination. Don’t know how fanboy can be so blind. Nevermind…

    • ▶️ ProtectOurHeritage ◀️

      Quacking? Like a duck? I’m sure they are not. If you meaning quaking, they aren’t doing that either.
      You teenage Tesla fanboys should invest in a dictionary.

  • Mike anonymous

    HO-LY… SH*T…… I mean I knew something like this was coming and could happen, but, I didn’t actually think it would ever happen. Just wow.

    Well…. what now?

  • john1168

    It could have been worse for Elon. Now he just needs to focus on his job and stay the heck off twitter.

  • EyalN

    Tesla = Elon Musk
    The company is not going to stay the same without him. China will take over the company or they will go out of business

    • ▶️ ProtectOurHeritage ◀️

      That’s business. It’s beautiful, isn’t it?

  • ▶️ ProtectOurHeritage ◀️

    And next he’ll be ousted as CEO. Great times ahead!

    • Craig

      What a stupid comment.

      • ▶️ ProtectOurHeritage ◀️

        How so? Tesla has huge problems of hemorrhaging cash to the point where they will not make any sort of profit from Model 3 for the foreseeable future. Meanwhile, the quality of the vehicles produced is questionable and their CEO seems to like to use social media to mislead and libel people.

        As Bob Lutz said, “he’s got 9,000 people in that assembly plant producing less than 150,000 cars per year. The whole thing just doesn’t compute”.

        If Tesla is to survive it needs real leadership. Nissan is already on their second-generation Leaf and the rest of the car industry is quickly catching up. Anyone who think things are fine at Tesla are either a deluded fanboys or off their faces on Ambien.

  • alexxx

    The power of one tweet.Times we live in.

  • xDRAN0x

    Tesla has outgrown Musk, he needs to go away.

  • DMax

    Remember how great it turned out for Apple without Jobs?

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