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Elon Musk agreed on Saturday to step down as chairman of Tesla and pay a $20 million fine to settle charges brought this week by the Securities and Exchange Commission.
Under the settlement, which requires court approval, Musk will be allowed to remain CEO but must resign as chairman of the board within 45 days. He cannot seek re-election for three years, according to court documents.
He accepted the deal with the SEC “without admitting or denying the allegations in the complaint,” according to a court filing.
Separately, Tesla agreed on Saturday to pay $20 million to settle charges that it failed to adequately police Musk’s tweets.
“The $40 million in penalties will be distributed to harmed investors in accordance with court-approved procedures,” the SEC said in a release.
The company also agreed to appoint two new independent directors to the board and create a board committee to oversee Musk’s communications.
Tesla declined to comment. A spokesperson confirmed that Musk will be allowed to continue serving on the board.
The SEC announcement comes two days after the agency filed a lawsuit against Musk, claiming he misled investors. The lawsuit centers on Musk’s Aug. 7 tweet in which he said he had secured funding to take Tesla private at $420 per share, causing the company’s stock price to surge. The SEC said he has not yet received funding.
The lawsuit seeks to bar Musk from serving as an officer or director of any public company.
Musk called the SEC’s lawsuit “unreasonable.”
“I have always acted in the interest of truth, transparency and the best interests of my investors,” he said. “Integrity has been the most important value in my life, and the facts will prove that I have never compromised that in any way.”
The agency filed the lawsuit on Thursday after Musk rejected an earlier settlement offer, CNBC reported, citing unnamed sources. Under the agreement, Musk will have to pay a “nominal fine” and step down as chairman for two years. He chose not to accept the terms “because he felt he had been dishonest with himself” following the settlement, the outlet reported.
Representatives for Musk did not immediately respond to CNN’s request for comment on Saturday.
Jay Dubow, a partner at Pepper Hamilton and a veteran of the SEC’s enforcement division, said it was “unusual” for the SEC to agree to let Musk remain CEO but step down as chairman.
Dubbo said that’s surprising given the “conduct at issue, if (the SEC) really thought it was egregious.” “The CEO is certainly more than the chairman,” DuBo said. participate in daily operations. ”
He said the SEC may have determined that removing Musk as CEO would do more harm to Tesla’s stock price and thus harm investors.
Barclays analyst Brian Johnson estimated in a recent report that there is a $130 “Musk premium” in Tesla shares that could disappear if he leaves.
It’s unclear whether the Justice Department will file criminal charges against Musk.
Tesla confirmed earlier this month that the U.S. Department of Justice was investigating whether Musk’s comments about taking the company private constituted criminal activity.
Dubow, a former SEC official, said he doubted the move would go anywhere.
“My guess is that it’s still possible that the Department of Justice will take some action, but … it’s more likely that the Department of Justice will choose not to take action,” he said.
The settlement may have soothed the SEC and reduced the Justice Department’s incentive to take action.
CNN Business (New York) First published September 29, 2018: 5:46pm ET