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Elon Musk, chief executive of Tesla, under pressure from his lawyers, company executives and investors, reached an agreement Saturday with the Securities and Exchange Commission to resolve a securities fraud case. The settlement will force Musk to step down as president for three years and pay a $ 20 million fine.
The second. announced the deal two days after he sued Mr. Musk in federal court for fraud and misled investors his post on Twitter last month that he had "secured funding" for a buyback of the electric car business at $ 420 per share.
The transaction will allow him to remain as General Manager.
It is not clear why Mr. Musk changed his mind. But people familiar with the situation said that Mr. Musk's lawyers and the company had decided to reopen talks with HK on Friday.
Tesla shares have been hit hard since the S.E.C filed suit. Friday, the title fell by nearly 14%.
The conditions are slightly more difficult than those that two people informed about the talks Musk rejected Thursday, calling for a two-year suspension from the presidency and a $ 10 million fine.
Tesla, who is also settling, will be fined $ 20 million. The company has not been accused of any fraud.
The company will add two independent directors and take steps to monitor Mr. Musk's communications with investors. It will also create a standing committee of independent directors to oversee disclosures and potential conflicts of interest.
Jay Clayton, the SEC chairman, said the settlement with Musk and Tesla sent a message that "when companies and insiders make statements, they must act responsibly, including trying to so that these statements are not false or misleading.
In settling, Mr. Musk has neither admitted nor denied the misleading investors under the civil fraud charge, which means he can no longer say later that he did nothing wrong .
The settlement with the SC accused Tesla of failing to ensure that information important to investors was disclosed in a timely and appropriate manner.
Mr. Musk had a good reason to reopen the settlement talks because Mr. S.C., in suing him, had tried to permanently prevent him from performing the duties of senior officer or leader of Tesla or any other public corporation. Under the agreement reached on Saturday, he will not only remain as CEO, but will also remain a member of the board of directors, but not as chairman.
"The package of corrective actions and remedies announced today is specifically designed to address misbehavior by strengthening Tesla's governance and oversight to protect investors," said Stephanie Avakian, co-director of SEC executing division
According to people familiar with the negotiations, Musk was worried about whether settling a civil fraud charge could affect the ability of Tesla and other companies it runs, including SpaceX and Boring, to collect funds from private investors. Debt markets.
But a spokesman for Tesla said the USITC had waived all of these companies so its settlement would not be held against them.
Derogations in such a situation are not uncommon, said legal experts.
A spokesman for Tesla said that Mr Musk, a billionaire, would buy $ 20 million worth of Tesla shares. The amount of inventory purchased by Mr. Musk is the penalty that the corporation is required to pay under the settlement, which was filed in federal court in Manhattan.
The events of recent days followed a series of calamitous incidents in Tesla, many of which were injuries inflicted by Mr Musk and his privatization tweet.
The second. reacted quickly after the tweet of August 7, which resulted in an immediate increase in Tesla shares. The regulators have served a summons on the company seeking information and have decided to collect testimony from Mr. Musk and other people in the company, said people familiar with the subject.
Negotiations for an initial settlement began about a week ago after the SEC talks said that it was expected to send an official notice to Mr. Musk and Tesla that & # 39; He was considering filing a lawsuit, the informed people said on the talks. By their account, all parties felt that an agreement had been reached Wednesday night and that the plan provided for a settlement with Musk and Tesla, announced Thursday.
It was alleged that Mr. Musk had departed from a settlement, in part because he feared he would not be able to tell investors later that he had done nothing wrong. But Saturday's regulations require him to do it.
In a "admit or deny" by-law, a party to the by-law can no longer disavow the terms of the by-law.
After Mr Musk had declared the contract dismissed on Thursday, his lawyers had asked SEC to wait a few days for them to be able to speak it, but the regulators said no, said another person familiar with the subject but not allowed to speak publicly.
Once the MOE sued Mr. Musk, his lawyers continued to talk to him about advancing a settlement and finally, he agreed, said this person.
Meanwhile, Mr. Musk had conversations with investors and Mark Cuban, an entrepreneur who had his own battles with the SEC, and he gave him an idea of how difficult it is to fight one of those lawsuits even he finally won. .
Parties worked much of Friday and Saturday to close a deal.
The colony clears a big puzzle for Tesla, but other problems remain.
The second. continues to address the company's past claims regarding its production goals. And now that Musk is willing to step down as president, Tesla's board needs to decide who should replace him.
Emily Flitter, David Gelles and Andrew Ross Sorkin contributed to the report.
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