The Securities and Exchange Commission has entered into a settlement with Tesla Motors and its CEO Elon Musk regarding the fraud charges levied a week ago. The charges were against Elon Musk for his tweets regarding the company’s finances and a “financing secured” statement for a privatization buyout that raised stock prices. The company was charged with failing to have required disclosure controls and procedures relating to Musk’s tweets.

The settlement allows Tesla and its CEO to not admit to any wrongdoing and in return, both the company and Mr. Musk will pay $20 million each in fines and Musk will step down as the Chairman of the Board for Tesla, but remain CEO of the company.

The complaint came after Musk tweeted on August 7 that funding was “secured” for a privatization buyout of Tesla Motors to the tune of $420 per share. That was a substantial premium over the then stock price of the company and resulted in a marked increase in stock price for the company immediately afterwards. The SEC alleged that, in truth, Musk knew that funding was, in fact, secure and was subject to numerous contingencies. None of the deal’s terms had been discussed with those involved and thus Musk’s statements had no basis in fact.

The complaint against Tesla Motors came because the company had notified the market in 2013 that Musk’s Twitter account was a means of announcing material information about the company. It then had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in SEC filings. Nor did it have processes to ensure that Musk’s tweets were accurate or complete.

An independent chairman will replace Musk on the board and Tesla will establish a new committee of independent directors for controls and procedures to oversee Musk’s communications. The fines paid ($40 million in total) will be distributed among those harmed investors according to an SEC court-approved process.

As of this writing, Musk has resigned as chairman of the Tesla Motors board of directors. No replacement has been named.

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An automotive enthusiast for most of his adult life, Aaron has worked in and around the industry in many ways. He is an accredited member of the Rocky Mountain Automotive Press (RMAP) and freelances as a writer and journalist around the Web and in print. You can find his portfolio at AaronOnAutos.com.

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