Blog Musk Settles SEC Fraud Charges, Will Step Down as Tesla’s Chairman

Tesla Chief Executive Elon Musk will give up his chairman title under the terms of a settlement with the Securities and Exchange Commission related to fraud charges, according to a release.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations. Among other relief, the settlements require that:



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.



“The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla’s corporate governance and oversight in order to protect investors,” Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, said in a release.

According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share — a substantial premium to its trading price at the time — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.

The settlement is subject to court approval.

 

[fmm]

the SEC does not approve Directors or who is appointed Chair of a company. And, personally, I think it's far more likely that an existing Independent Director takes over the role of Chairman.

 

[PhilDavid]

the SEC does not approve Directors or who is appointed Chair of a company. And, personally, I think it's far more likely that an existing Independent Director takes over the role of Chairman.

If that's the case and that person is 100% trustworthy we are in good shape. I hope there is also some provision where Elon can't be fired as CEO without the majority of the board agreeing just to be on the safe side.

We need Elon and Tesla to continue to be nimble and what is best.

Hope Elon will be more careful in the future. Most of the awful drama this summer was a result of unwise tweets. Easily avoided if someone could just review what he tweets before it is posted.

 

[Tam]

...Easily avoided if someone could just review what he tweets before it is posted.

That seems to be Office of Censorship as described in the settlement:

• "Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;"

 

[Barklikeadog]

That seems to be Office of Censorship as described in the settlement:

• "Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;"

Tesla has announced that the 5 member independent board will consist of the following directors:
Whelan Musk
Floyd Musk
Apfel Musk
Treon Musk
Hooper Musk

 

[Darren Donovan]

OK, well it's done, over with - this is the best thing for Tesla, Elon, customers and shareholders. Literally no one wanted thing lingering around.

If you think about it, being Chairman of the Board is probably the least important thing he does at Tesla. Remaining CEO is far more important. $40m is chump change for both him and Tesla in the grand scheme of things.

So on with Q3 sales figures!

But isn't Tesla desperate for cash at the moment?

 

[Leroy1947]

I think this is all to the good for investors. Elon Musk is a moral midget; every time he opens his mount, small investors get screwed. I have never bought the fiction that Elon Musk is a genius who 1. founded PayPal 2. Founded SpaceX and 3. Founded Tesla. I regard him as little more than a "talking head" who serves the interests of the extremely wealthy and sophisticated investors who are the true owners of these companies. They are part of the super-wealthy ruling elites who run this country, but don't wish to be identified as such. The state, local and federal governments jump to their tune, as reflected by the generous concessions granted to them at every turn. Furthermore, Tesla, Solar City and SpaceX are all part of a cohesive plan to revolutionize transportation, communications, and intense surveillance of every citizen. The SpaceX satellites will enable instantaneous car-to-car communications and reliable GPS that are the key to robotic transportation. Wave goodbye to personal privacy. In the end, this will destryo the fertility of the few healthy and intelligent citizens who have somehow survived the devastating wars of the past century, all for the purpose of gaining control of all the world. Who wants to bring innocent children into such an unfair, abusive police state? As intelligence and fertility decline, and the average person has no choice to accept welfare, the entire mess will collapse from within, as has always happened with every civilization thus far attempted. Tesla will do fine without the "help" of Elon Musk. Let's all enjoy our technological Tesla toys while we can, and pray that the super-rich leave us with a little bread and treacle.

 

[PoitNarf]

I think this is all to the good for investors. Elon Musk is a moral midget; every time he opens his mount, small investors get screwed. I have never bought the fiction that Elon Musk is a genius who 1. founded PayPal 2. Founded SpaceX and 3. Founded Tesla. I regard him as little more than a "talking head" who serves the interests of the extremely wealthy and sophisticated investors who are the true owners of these companies. They are part of the super-wealthy ruling elites who run this country, but don't wish to be identified as such. The state, local and federal governments jump to their tune, as reflected by the generous concessions granted to them at every turn. Furthermore, Tesla, Solar City and SpaceX are all part of a cohesive plan to revolutionize transportation, communications, and intense surveillance of every citizen. The SpaceX satellites will enable instantaneous car-to-car communications and reliable GPS that are the key to robotic transportation. Wave goodbye to personal privacy. In the end, this will destryo the fertility of the few healthy and intelligent citizens who have somehow survived the devastating wars of the past century, all for the purpose of gaining control of all the world. Who wants to bring innocent children into such an unfair, abusive police state? As intelligence and fertility decline, and the average person has no choice to accept welfare, the entire mess will collapse from within, as has always happened with every civilization thus far attempted. Tesla will do fine without the "help" of Elon Musk. Let's all enjoy our technological Tesla toys while we can, and pray that the super-rich leave us with a little bread and treacle.

Better watch out, the guy standing behind you is planning on stealing your tin foil hat! Run while you can!!!

 

[Buggle]

I think this is all to the good for investors. Elon Musk is a moral midget; every time he opens his mount, small investors get screwed. I have never bought the fiction that Elon Musk is a genius who 1. founded PayPal 2. Founded SpaceX and 3. Founded Tesla. I regard him as little more than a "talking head" who serves the interests of the extremely wealthy and sophisticated investors who are the true owners of these companies. They are part of the super-wealthy ruling elites who run this country, but don't wish to be identified as such. The state, local and federal governments jump to their tune, as reflected by the generous concessions granted to them at every turn. Furthermore, Tesla, Solar City and SpaceX are all part of a cohesive plan to revolutionize transportation, communications, and intense surveillance of every citizen. The SpaceX satellites will enable instantaneous car-to-car communications and reliable GPS that are the key to robotic transportation. Wave goodbye to personal privacy. In the end, this will destryo the fertility of the few healthy and intelligent citizens who have somehow survived the devastating wars of the past century, all for the purpose of gaining control of all the world. Who wants to bring innocent children into such an unfair, abusive police state? As intelligence and fertility decline, and the average person has no choice to accept welfare, the entire mess will collapse from within, as has always happened with every civilization thus far attempted. Tesla will do fine without the "help" of Elon Musk. Let's all enjoy our technological Tesla toys while we can, and pray that the super-rich leave us with a little bread and treacle.

I take it you're a fan of the science fiction genre?

 

[mkspeedr]

This sucks and definitely put a damper on my weekend.

 

[JeffC]

It's good to get closure on the SEC investigation. Adding two independent board members probably will be good for the company, assuming great people can be found.

Elon should not have tweeted about taking the company private, having funding for it, etc., even if he had a verbal agreement from Saudi Arabia. Public companies simply can't work that way since such announcements have a material effect on stock price, etc. Probably at some level he knew that, but I think he's been under incredible pressure to get Model 3 out, etc.

I'm concerned about Elon and hope he can step away from production hell and logistics hell to gain some better perspective. He was vastly overworked and was suffering personally. That probably contributed to his unwise tweets.

It will be interesting to see who will be the board chariman. I hope for someone who will do a great job.

In the big picture this is a bump in the road, and I hope everything improves as a result.

 

[S4WRXTTCS]

That seems to be Office of Censorship as described in the settlement:

• "Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications;"

This is the part that impacts us the customers the most. I can certainly understand putting the muzzle on for investor related tweets, but what about car features? What about tweets to customers queries?

That was a fun part of Tesla even though it wasn't really what you'd call proper customer communication.

We might never get 3-6 months definitely, maybe jokes. Okay, so its Tesla/Elon so maybe some things never die even if they go through a lawyer.

 

[JeffC]

This is the part that impacts us the customers the most. I can certainly understand putting the muzzle on for investor related tweets, but what about car features? What about tweets to customers queries?

That was a fun part of Tesla even though it wasn't really what you'd call proper customer communication.

We might never get 3-6 months definitely, maybe jokes. Okay, so its Tesla/Elon so maybe some things never die even if they go through a lawyer.

Social media like Twitter is a tool. I think it's excellent that the CEO can talk directly to customers about product information as Elon has done.

However anything that materially affects stock price, etc., probably should not be tweeted. Anyone who works at a public company should know that.

Use Twitter to share customer feedback. Don't use it to talk about things that affect stock price. Simple. It's not rocket science.

Hopefully they'll get a cool attorney who understands this and blocks the stock-affecting tweets but approves the customer tweets quickly. Again, not rocket science.

 

[Ken7]

I think this is all to the good for investors. Elon Musk is a moral midget; every time he opens his mount, small investors get screwed. I have never bought the fiction that Elon Musk is a genius who 1. founded PayPal 2. Founded SpaceX and 3. Founded Tesla. I regard him as little more than a "talking head" who serves the interests of the extremely wealthy and sophisticated investors who are the true owners of these companies. They are part of the super-wealthy ruling elites who run this country, but don't wish to be identified as such. The state, local and federal governments jump to their tune, as reflected by the generous concessions granted to them at every turn. Furthermore, Tesla, Solar City and SpaceX are all part of a cohesive plan to revolutionize transportation, communications, and intense surveillance of every citizen. The SpaceX satellites will enable instantaneous car-to-car communications and reliable GPS that are the key to robotic transportation. Wave goodbye to personal privacy. In the end, this will destryo the fertility of the few healthy and intelligent citizens who have somehow survived the devastating wars of the past century, all for the purpose of gaining control of all the world. Who wants to bring innocent children into such an unfair, abusive police state? As intelligence and fertility decline, and the average person has no choice to accept welfare, the entire mess will collapse from within, as has always happened with every civilization thus far attempted. Tesla will do fine without the "help" of Elon Musk. Let's all enjoy our technological Tesla toys while we can, and pray that the super-rich leave us with a little bread and treacle.

This is best read with the Twilight Zone music playing in the background.

 

[Barklikeadog]

This is the part that impacts us the customers the most. I can certainly understand putting the muzzle on for investor related tweets, but what about car features? What about tweets to customers queries?

That was a fun part of Tesla even though it wasn't really what you'd call proper customer communication.

We might never get 3-6 months definitely, maybe jokes. Okay, so its Tesla/Elon so maybe some things never die even if they go through a lawyer.

lawyer? nah just a little less ego.

 

[dethman]

$40M goes to harmed investors? like the shorts? OUCH for elon.

 

[Leroy1947]

I take it you're a fan of the science fiction genre?

Your silly insults are not welcome; I hereby return them to you in triplicate. It's standard operating procedure for the big money to have a "front man" who represents them. Such was the case with John D. Rockefeller, Andrew Carnegie, and Bill Gates. Where do you think the money came from to monopolize oil, steel, and the computer business? It's an old trick. You need to bone up on history, and I don't mean the kind taught at the university level. The truth is hidden within layers of lies, much like an onion. I suppose you think that this is a "free country"; it's not. It was incorporated by the British Empire as a result of the American Civil War, which was financed on both sides by British banksters. Nothing new under the sun. I do think that Mr. Musk should be removed from his position of authority. That may have been the plan all along. We'll never know.

Meanwhile, I'm thoroughly impressed with the achievements of Tesla. I just took delivery of my Model III, and the fit and finish are impeccable, regardless of all the yowling and meowling about such things. It's smooth and silent. The features and engineering are very, very impressive. I look forward to the day when they link these cars with the SpaceX satellite system, not to mention the tunneling systems they have in mind.

 

[bobinfla]

Social media like Twitter is a tool. I think it's excellent that the CEO can talk directly to customers about product information as Elon has done.

However anything that materially affects stock price, etc., probably should not be tweeted. Anyone who works at a public company should know that.

Use Twitter to share customer feedback. Don't use it to talk about things that affect stock price. Simple. It's not rocket science.

Hopefully they'll get a cool attorney who understands this and blocks the stock-affecting tweets but approves the customer tweets quickly. Again, not rocket science.

Have you visited the Investment threads on this board? Based on the discussion there, apparently everything in the known universe affects the stock price.

 

[voip-ninja]

Most likely outcome, IMO, is Tesla becoming much more sensitive to stock price and PR. Not sure if that is a good thing.

 

[JeffC]

Most likely outcome, IMO, is Tesla becoming much more sensitive to stock price and PR. Not sure if that is a good thing.

I don't think they care very much about stock price, and if not, that's a good thing. The only time stock price really matters is when they want to raise capital by issuing more stock. Generally speaking they don't need to do that. Model Y factory will be built using China bank loans, probably some organic profits from Model 3, private placements, corporate bonds, etc., similar to how they funded Gigafactory and Model 3 production lines (with U.S. financial institutions).

If some of Elon's tweets got filtered by a PR person and attorney, I actually think that could be a good thing. Obviously I'm a huge fan of Musk, Tesla, SpaceX, PayPal, etc., but a couple of his tweets really should not have gone out. Literally 99.9+% of his tweets are ok.

 

[NanoGrid]

Better watch out, the guy standing behind you is planning on stealing your tin foil hat! Run while you can!!!

Troll-of-the-month nomination!