Elon Musk has agreed to step down as chairman of Tesla as part of a deal with a US regulator over accusations of security fraud.
The US Securities and Exchange Commission (SEC) took legal action against Musk earlier in the week over tweets he sent announcing his intentions to take the electric car company private in early August.
Musk claimed at the time he had secured funding for the transaction and that a shareholder vote was the only remaining obstacle. The SEC contested he had not discussed privatisation with potential partners, and had led to “significant market disruption.”
Tesla had no disclosure controls or procedures in place to assess whether information in Musk’s tweets required disclosure in Tesla’s SEC filings, despite the company notifying the market in 2013 Musk’s Twitter account would be used to announced information about the company, the SEC claimed.
It also failed to implement sufficient processes to ensure his tweets were “accurate or complete,” it added.
While he is able to remain chief executive, Musk will resign as chairman within the next 45 days and cannot hold the position for another three years. He will be replaced by an independent chairman.
45 days later
Two new independent directors will be appointed to Tesla‘s board, and both Musk and Tesla will pay $20m each as a penalty, which will be distributed to harmed investors, the SEC said.
The measures are intended to “prevent further market disruption and harm to Tesla’s shareholders,” Steven Peiken, co-director of the SEC’s enforcement devision, said in a statement.
“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 said.
Musk had called the SEC’s legal action “unjustified,” saying it had left him “deeply saddened and disappointed.”
“I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way,” he added.
Tesla released a statement on Thursday evening saying it and the board of directors were “fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century”.