Avakian and Peikin demanded that Musk pay $20 million and be removed as Tesla's chairman for at least three years, harsher terms than were being offered in the scrapped deal, people familiar with the matter said. The appointment of two new Board members, as well as the creation of a committee tasked with "placing additional controls and procedures to oversee" Musk's communications, were warmly received by the Tesla community as well.
Investors in electric auto maker Tesla were buoyed by news that Elon Musk will have to step down as chairman of the firm. The agency also required that the company pay $20 million in penalties to settle separate claims related to Musk's use of social media.
Tesla has turned to an army of volunteers to help it meet ambitious third quarter vehicle production targets after a bruising few days for chief executive Elon Musk, who was forced to pay $20m in order to settle a dispute with United States regulators.
They also hoped the row would cap several months of volatility around Tesla's shares driven in part by a series of rows over Musk's tweets and public pronouncements.
The SEC said Musk's statements on Twitter were "false and misleading" and that he had never discussed the plans with company officials or potential funders. The SEC eventually sued Musk for securities fraud on Thursday. Under the settlements, which are contingent on court approvals, Musk will step down as Tesla chairman and will be replaced by an independent chairman. In addition to appointing an independent chairman, Musk will be ineligible to be re-elected as chairman for three years.
"The $40 million in penalties will be distributed to harmed investors under a court-approved process", the SEC said.
"The total package of remedies and relief announced today are specifically created 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. Tesla shares plummeted 14% on Friday, the biggest drop in nearly five years.
Analysts from Cowen wrote in a note over the weekend that while the settlement would likely lead to a near-term bump for Tesla shares, it could leave Musk open to future litigation - including class-action lawsuits that have already been filed.