JUDGE APPROVES SEC SETTLEMENT WITH ELON MUSK
On September 29, 2018, the SEC announced that Elon Musk and Tesla, Inc. had each agreed to settle the securities fraud charge brought by the Securities and Exchange Commission (the “SEC”). Days after the announcement of the settlement, Mr. Musk released several tweets disparaging the SEC and referring to it as the “Shortseller Enrichment Commission.” Today, as was anticipated and despite Mr. Musk’s tweets, a federal judge approved the terms of the settlement, which included the following:
The removal of Mr. Musk as Chairman of the board of directors of Tesla with the understanding that Mr. Musk will not be eligible to be re-elected as Chairman for three years;
Tesla will be required to appoint two new independent directors to its board of directors;
Tesla will be required to establish a new committee consisting of independent directors and establish additional controls and procedures to oversee Mr. Musk’s communications; and
Each of Mr. Musk and Tesla will be required to pay a $20 million penalty which will be distributed to harmed investors, as approved by the court.
Mr. Musk and Tesla will now be required to comply with the terms of the settlement and investors will be able to move forward without the cloud of regulatory punishment hanging over Tesla.
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