Tesla chief Elon Musk has been forced to step down as the firm’s Chairman for three years though he will continue duties as CEO after reaching an agreement with Securities and Exchange Commission (SEC) and the firm has also agreed to pay a fine of $20 million. The fiasco happened due to Elon Musk’s tweets about making Tesla a private company that led to SEC suing the firm for alleged securities fraud. SEC chairman Jay Clayton said that the deal will protect the markets and rights of investors and shareholders of Tesla. Mr. Clayton said that this decision reaffirms federal laws about maintaining the sanctity of insider information and that corporate heads have to act responsibly while making public statements to ensure that it does not influence investment decisions of the market.
The SEC’s decision to sue Mr. Musk and Tesla for fraud was taken after he wrote a tweet that he was planning to turn the electric automobile firm into a private firm. He had shared another tweet commenting that he had secured enough funding to buy back the firm’s shares from the market at around $420 per share. This led to a brief spurt in the company’s shares on burnouses it is listed in but then fell again.
SEC declared these statements by Musk and false and misleading as he had not mentioned any details about deal terms, investor details backing the purchase and other relevant information. Though Elon Musk said that SEC action was hasty and unjustified but henceforth he would comply with firm’s communication procedures while tweeting about its plans in public. The SEC dept. was planning to ban him forever from the board of any public traded firms but he will now be able to stay on as Tesla’s CEO though he will step down as Chairman within 45 days. A new independent chairman will be appointed to take over the company’s board.