The charges come after Musk claimed in August via a series of tweets that he was planning to take the electric vehicle maker private, and implied that such a move was imminent with "funding secured". Under the settlements, which are contingent on court approvals, Musk will step down as Tesla chairman and will be replaced by an independent chairman.
Steven Peikin, co-director of the SEC's Enforcement Division said the resolution is meant to prevent further market disruption and harm to Tesla investors.
"As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla's board will adopt important reforms - including an obligation to oversee Musk's communications with investors - and both will pay financial penalties", Steven Peikin, Co-Director of the SEC's Enforcement Division, said in a statement. He'll also not be eligible to be elected into the Chairman position for three years, Time reports.
According to the SEC's complaint, Musk's misleading tweets caused Tesla's stock price to jump by over six percent on August 7, and led to significant market disruption. "The resolution is meant to prevent further market disruption and harm to Tesla's shareholders", said SEC enforcement division co-director Steven Peikin.
Loup Ventures Managing Partner Gene Munster noted that the SEC settlement is the best outcome possible from Elon Musk's "funding secured" fiasco. His tweets implied that the only remaining barrier to the privatisation would be a shareholder vote.
The stock had dropped 14% on Friday after he'd turned down the initial settlement terms.
The agreement with the US Securities and Exchange Commission will come as a relief to investors, who had feared a lengthy legal fight. The open board chairperson role creates an opportunity for Tesla to potentially put someone in place that is capable of influencing Musk and helping Tesla reach sustainability.
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.