Tesla CEO Elon Musk will give up his position as chairman of the company's board and pay a $20 million fine to settle a fraud complaint with the U.S. Securities and Exchange Commission, the agency announced Saturday. He will remain CEO.
The SEC sued Musk Thursday for misleading investors when he said on Twitter that he had secured financing to take the electric-car maker private. Musk said he would fight the charge. The SEC had sought his dismissal as CEO.
Palo Alto-based Tesla will also pay $20 million to settle a charge that, when it came to Musk's tweets, the company failed to have required disclosure controls and procedures in place.
According to the SEC, Musk's statements "falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock's then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote."
Musk's Twitter posts caused the company's stock price to rise more than 6 percent Aug. 7 and prompted significant market disruption, the SEC alleged.
"Neither celebrity status, nor reputation as a technological innovator, provide an exemption from the federal securities laws," said Stephanie Avakian, co-director of enforcement for the SEC.
Under the terms of the agreement, Musk will remain the company's CEO but step down as chairman within 45 days. Musk will not be eligible to be chairman again for three years.
Tesla will name two new independent board directors and put controls and procedures in place to oversee Musk's communication, the SEC said in a news release.
The combined $40 million in settlement money will be distributed to investors who have been harmed, according to the release.
