Tech magnate Elon Musk agreed to step down as chairman of Tesla and will also pay a $20 million fine in a deal to settle charges by the Securities and Exchange Commission (SEC).
The settlement comes just two days after the SEC sued Musk for fraud and sought to block the way of entrepreneur from running affairs of Tesla or any other publicly-traded company.
Musk invited wrath in August when he falsely claimed on Twitter that he had secured funds for a multi-billion dollar buyout of Tesla, leading its share price to swell and creating huge losses for ‘short-selling’ investors who had bet against the firm.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The SEC, in a complaint to the court, claimed that Elon Musk had failed to abide by the anti-fraud provisions of the federal securities laws.
As part of the multi-million dollars settlement, Musk will remain as the Chief Executive Officer (CEO), but can’t take the seat as the chairman for three years.
Moreover, Both Tesla and Musk will pay $20 million in fines that will be distributed in a court-approved process to the investors that were potentially harmed by Musk’s Twitter activity.
Tesla will now be appointing two new independent directors to its board.
In order to avoid similar inconvenience in the future, the company will also hire a lawyer that will not only monitor the communication of Musk but also oversee his tweets.
However, Musk has agreed to a condition where he will not admit nor deny if he was guilty of committing the securities fraud. According to SEC, this settlement will assist Tesla to strengthen its corporate governance and protect its investors.