Tesla CEO Elon Musk settled fraud charges with the Security and Exchange Commission on Saturday, requiring the billionaire to pay a $20 million fine and step down as chairman for three years. He will remain CEO.
Musk has 45 days to resign from the chairmanship, and Tesla will appoint an independent chairman to replace him.
Tesla will also add two new independent chairmen to the board of directors within 90 days and pay a separate $20 million penalty.
The agreement calls for Tesla to create a permanent committee that oversees the executive’s communications with investors, including those made through Twitter, according to the SEC.
This comes just two days after the SEC filed a complaint claiming that Musk made a “false and misleading” statement when he tweeted that the company had enough funding to go private.
“Am considering taking Tesla private at $420. Funding secured,” Musk tweeted last month.
SEC Chairman Jay Clayton issued a statement in response to the settlement:
“This matter reaffirms an important principle embodied in our disclosure-based federal securities laws. Specifically, when companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading and do not omit information a reasonable investor would consider important in making an investment decision.”
Financial analysts say that a fast solution was the best scenario for the electric auto company.
“His agreement to pay a fine and step down as chairman gives Tesla a chance to solve its debt issues and become a profitable company,” said Karl Brauer, publisher for Autotrader and Kelley Blue Book. “Those hurdles could have been cleared under the cloud of an SEC legal battle and uncertain leadership, but Tesla’s chances for success are much higher without those factors in play. The company can still be a major player in the impending shift to electric vehicles, but Tesla’s window of opportunity gets smaller every day as additional competitors come to market.”
Musk doesn’t admit nor deny wrongdoing per the agreement and Tesla was not charged with fraud.
The terms of the settlement are still subject to court approval.
USA TODAY has reached out to Tesla for comment.
Contributing: CNBC. Follow Dalvin Brown on Twitter: @dalvin_brown
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