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Elon Musk Settles SEC Fraud Charges, Must Step Down As Tesla's Chairman
Soon after it was reported that the Securities and Exchange Commission (SEC) sued Elon Musk for making false statements related to his abandoned efforts to take Tesla private, the SEC announced today that Elon Musk has agreed to settle the fraud charges. In a press release, the SEC says "Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC's allegations." The settlements, which are subject to court approval, require the following:
- Musk will step down as Tesla's Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
- Tesla will appoint a total of two new independent directors to its board;
- Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk's communications;
- Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
Slashdot reader Rei writes: In the wake of initially refusing a settlement offer over the wording, Elon Musk has now settled today with the SEC, concerning his tweets about taking Tesla private. As per the settlement agreement, there is 1) no admission of wrongdoing; 2) Musk and Tesla will each pay a $20 million fine; 3) Musk will remain as CEO of Tesla; 4) Musk will be prohibited from serving as chairman of Tesla for three years; and 5) Tesla must appoint two new members to its board of directors. An additional clause seems apropos: Musk must "comply with all mandatory procedures implemented by Tesla, Inc [...] regarding (i) the oversight of communications relating to the Company made in any format, including, but not limited to, posts on social media..."
- Musk will step down as Tesla's Chairman and be replaced by an independent Chairman. Musk will be ineligible to be re-elected Chairman for three years;
- Tesla will appoint a total of two new independent directors to its board;
- Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk's communications;
- Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.
Slashdot reader Rei writes: In the wake of initially refusing a settlement offer over the wording, Elon Musk has now settled today with the SEC, concerning his tweets about taking Tesla private. As per the settlement agreement, there is 1) no admission of wrongdoing; 2) Musk and Tesla will each pay a $20 million fine; 3) Musk will remain as CEO of Tesla; 4) Musk will be prohibited from serving as chairman of Tesla for three years; and 5) Tesla must appoint two new members to its board of directors. An additional clause seems apropos: Musk must "comply with all mandatory procedures implemented by Tesla, Inc [...] regarding (i) the oversight of communications relating to the Company made in any format, including, but not limited to, posts on social media..."
The SEC backed down from insisting on removing his as CEO.
But did force his removal as chairman and the appointment of two independent directors, which probably now makes it a realistic possibility that the board itself could remove him as CEO if he doesn't get his act together.
This is insane. An unelected body that is the SEC can arbitrarily fine someone 20 million dollars after an admission of no wrong doing, then tell them they can't sit on a board for 3 years? That crap has to go, and quickly!
The board answers directly to the shareholders, who can remove any or all of the board.
If Musk can convince enough of the shareholders to vote to take the company private, then the board becomes irrelevant.
As a long I am increasing my stake in this company in the hopes that it does go private. Tesla is way ahead of their competition, silly tweets or not.
I thought about the same: How to make sctock price scam legaly without getting into trouble with SEC? Make SEC do it for you! Let them kick you out, you and your allies buy shares for 150 instead 420+, and once Tesla is private, come back through the front door...