SEC.gov | Elon Musk Settles SEC Fraud Charges; Tesla …

Washington D.C., Sept. 29, 2018

The Securities and Exchange Commission announced today that Elon Musk, CEO and Chairman of Silicon Valley-based TeslaInc., has agreed to settle the securities fraud charge brought by the SEC against him last week. The SEC also today charged Tesla with failing to have required disclosure controls and procedures relating to Musks tweets, a charge that Tesla has agreed to settle. The settlements, which are subject to court approval, will result in comprehensive corporate governance and other reforms at Teslaincluding Musks removal as Chairman of the Tesla boardand the payment by Musk and Tesla of financial penalties.

According to the SECs complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share a substantial premium to its trading price at the time that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SECs complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. According to the SECs complaint, Musks misleading tweets caused Teslas stock price to jump by over six percent on August 7, and led to significant market disruption.

According to the SECs complaint against Tesla, despite notifying the market in 2013 that it intended to use Musks Twitter account as a means of announcing material information about Tesla and encouraging investors to review Musks tweets, Tesla had no disclosure controls or procedures in place to determine whether Musks tweets contained information required to be disclosed in Teslas SEC filings. Nor did it have sufficient processes in place to that Musks tweets were accurate or complete.

Musk and Tesla have agreed to settle the charges against them without admitting or denying the SECs allegations. Among other relief, the settlements require that:

The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Teslas corporate governance and oversight in order to protect investors, said Stephanie Avakian, Co-Director of the SECs Enforcement Division.

As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Teslas board will adopt important reforms including an obligation to oversee Musks communications with investorsand both will pay financial penalties, added Steven Peikin, Co-Director of the SECs Enforcement Division. The resolution is intended to prevent further market disruption and harm to Teslas shareholders.

The SECs investigation was conducted by Walker Newell, Brent Smyth, and Barrett Atwood and supervised by Steven Buchholz, Erin Schneider, and Jina Choi in the San Francisco Regional Office and Cheryl Crumpton in the SECs Home Office.

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SEC.gov | Elon Musk Settles SEC Fraud Charges; Tesla ...