Elon Musk Settles With SEC Agrees to Pay $20 Million Fine, Quit as Chairman

Elon Musk has settled a lawsuit filed by the Securities and Exchange Commission after agreeing to pay a $20 million fine and step down as chairman at Tesla within the next 45 days. He will not be allowed to seek re-election for at least three years according to court filings. 

The deal with the SEC will allow Musk to stay on as CEO.

Musk accepted the deal with the SEC after initially rejecting it on Friday "without admitting or denying the allegations of the complaint," according to a court document.

Tesla will also have to pay a $20 million fine to settle a claim by the SEC that the company failed to adequately monitor Musk's social media. 

"The $40 million in penalties will be distributed to harmed investors under a court-approved process," the SEC said in a press release.

"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," said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. 

"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," added Steven Peikin, Co-Director of the SEC’s Enforcement Division.  "The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders."

Two new independent directors will be appointed to Tesla's board, and a committee will be established that will oversee Musk's communications. 

The SEC filed the lawsuit on Thursday claiming he misled investors by sending a tweet on Aug. 7 in which Musk said he had "secured" funding to take the car company private at $420 a share, causing the stock to soar. 

The SEC's lawsuit sought to bar Musk from serving as an officer or director of any publicly traded company. 

Musk called the lawsuit filed by the SEC "Unjustified." 

Photo: Getty Images