Musk rules his trial in fraud with the SEC and retires as president of Tesla

When Tesla CEO Elon Musk tweeted last month that funds had been secured for a $ 70 billion private investment, it appeared he had made a huge blow – or would soon face an investigation SEC.

It turned out to be the last one.

Musk has agreed to settle with the Securities Exchange Commission on Saturday, according to reported information.

He will step down as president for three years and pay a fine of $ 20 million. Tesla will also pay a fine of $ 20 million, new governance rules and the addition of two independent directors. Musk will remain as CEO and retain a place on the board.

Musk's decision came two days after he said he would not solve his problems with the SEC – although he paid the price with a slightly harsher penalty, according to The New York Times. According to the settlement, Musk "has neither admitted nor denied misleading investors in connection with the civil fraud charge", suggesting that he can not deny having committed a wrongdoing to a later date.

The majority of the SEC's civil actions result in a settlement – and regulatory evictions are rare.

Tesla's stock has dropped 13% since the SEC trial.

$ 420 tweet "secured financing"

It was a charge of civil fraud that focused solely on Musk's "private" tweet of last month and misleading investors.

The pursuit of the SEC showed that no official offer at a specific price had been made to Musk or to the board.

According to Musk in the SEC document, the price of $ 420 is based on a premium of 20% over the closing price of the day (or $ 419), rounded to $ 420. According to the SEC document, Musk thought his girlfriend would find the number 420 "funny, which is certainly not a good reason to choose a price."

It is this level of amateur crime that has allowed the SEC to obtain this targeted fraud claim within a relatively short period of two months. It was a simple case.

Council supports Musk

Tesla 's board of directors issued a statement of support to Musk on Thursday night: "Tesla and the board of directors have full confidence in Elon, his integrity and his leadership, which has allowed the America 's most successful auto company for over a century. Our goal remains the continuous production and delivery ramp for Model 3 for our customers, shareholders and employees. "

The primary fiduciary responsibility of a board of directors is to act in the best interests of the shareholders. Tesla 's board members include Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, James Rupert Murdoch, CEO of Twenty – First Century Fox, and Linda Johnson Rice, President and CEO of Johnson Publishing Company.

The company has not been accused of fraud.

The officer and the bar manager (it sounds better than that)

The pursuit of the SEC was aimed at obtaining compensation from Musk in the form of "restitution orders, together with prejudgment interest, civil penalties, as well as an officer's bar and of director against Musk ".

The standard for an O & D Bar is when an officer or director of a public office presents "unfitness" to serve.

In general, the SEC searches for permanent O & D Bars or five-year terms and has extended the sanction to outside directors "with significantly less involvement in the day-to-day business of the company". In other words, board members may be prohibited from ignoring governance alarm signals.

SEC Commissioner Luis Aguilar noted in a 2012 speech: "I noticed how much the defendants were fighting to avoid the bars of officers and directors. It's one of the penalties that they fear the most, making it a precisely one. the most effective sanctions available. "

And now?

Expect fewer Musk tweets.

The lawsuit was a civil action and leaves open the possibility of the SEC launching further investigations into more complicated issues or the Department of Justice. Other Musk activities that the SEC could possibly study include the SolarCity acquisition, solar tiles, and model 3 run rates.

Tesla will need capital to grow. SEC investigations prevent the possibility of raising capital on government markets.

Robert Mueller, at the time he was director of the FBI in 2012, said that securities fraud "represents a big challenge because our market economy and our way of life rely on trust in the markets and Confidence in our citizens Financial fraud undermines this trust, with serious consequences: consequences such as wasting taxpayers' money, increasing insurance premiums and increasing commercial costs – not to mention the harm suffered by victims themselves.

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Read a summary of the accusations of the SEC against Musk here.

Read here a chronology of the privatization saga of Tesla.