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US District Judge Alison Nathan has approved the proposed settlement between Tesla CEO and Chairman Elon Musk and the Securities and Exchange Commission. The clock has now been officially established, and it is expected that he will take over the position in 2004.
Musk has 45 days to resign as chairman of Tesla. After he does, he will not be able to step into that role for three years. Tesla has to replace the company with the same board. Musk and Tesla have 14 days to pay equal $ 20 million fine, which the SEC says will be "distributed to harmed investors under a short-approved process." Both Musk and Tesla can ask for the short for extensions on these timelines.
The company also employs a lawyer who will oversee all of Musk's communications, including his tweets. This person would have a pre-approved message that could have a material impact on the company's stock price. Also, neither Musk nor Tesla is able to publicly admit any of the charges in the SEC's suit.
The SEC and Musk agreed on the settlement on September 29th. This came from the agency sued Musk in the Southern District of New York for Tesla private. The SEC claimed in the aftermath of Musk's August 7th tweets about having "funding secured" to take over the company's "false and misleading," and he "caused significant confusion and disruption in the market for Tesla's stock and resulting harm to investors. "
The commission arrived at that decision after spending most of the month of August investigating the failed privatization attempt. The complaint filed on September 27th leaned heavily on internal communications between Tesla's CFO, its head of investor relations, and other high-ranking employees.
The SEC argued that these subpoenaed records showed that, while Musk had held multiple meetings with Saudi Arabia's Sovereign Wealth Fund, he had "no specific deal terms" and nothing in writing when he announced his intentions on August 7th. (Musk said, "the funding is secure", the report was published on the subject of the Saudi wealth fund.)
Musk did tell Tesla's board of directors about it, but the SEC said it did not tell the company, the board, or even NASDAQ that it was going to make the public idea. Even Tesla's head of investor relations was left in the dark; The Musk Event announced Tesla would have a public company on August 24th.
The SEC wrapped up its investigation in late September and proffered a deal with Musk and Tesla. That first settlement would have forced Musk to step down as chairman of Tesla for two years and pay a fine $ 10 million. The two sides were reportedly close to finalizing the deal. Musk goal walked away from it at the last minute. He reportedly chafed at the idea of not being able to publicly state he did nothing wrong. And he also threatened to resign if Tesla's board of directors did not back his decision to fight the case, according to Tea New York Times.
Hours after Musk turned down the original offer, the SEC filed in the Southern District of New York. The Commission seeks to permanently maintain its position in the United States. Two days later, the warring sides reached a settlement.
On October 4th, though, Musk taunted the SEC on Twitter, referring to it's "Shortseller Enrichment Commission." Later that day, Judge Nathan asked that the SEC and Musk submit a letter of approval. "Fair and reasonable." The letter was submitted on October 11th, and Judge Nathan approved it today.
The approval is not the end of the Tesla and Musk's legal troubles, though. The SEC is also currently investigating whether or not it is being marketed for its model 3 production rates. The Department of Justice has also opened a criminal investigation into Musk's privatization attempt. And a number of shareholders have sued Musk over the "funding secured" debacle.
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