Elon Musk will resign as chairman of the board of Tesla pic.twitter.com/GjB6AkwADu — Eriq Gardner (@eriqgardner) September 29, 2018

In its court filings earlier this month, the SEC argued that Musk was attempting to impress his girlfriend, the singer Grimes, when he tweeted to his more than 20 million followers he might take Tesla private at $420 per share. Musk will have to resign in the next 45 days and won’t be able to join the board as chairman for three years after his resignation, according to the settlement. See: Tesla investors complained to the SEC — and here’s what they said

Read also: Why legal experts say the SEC has a strong case against Musk

The SEC also charged Tesla on Saturday with failing to have in place the required disclosure controls and procedures relating to Musk’s tweets, a charge that Tesla also has agreed to settle and which will result in comprehensive corporate-governance modifications and other reforms at Tesla. The settlement should place more oversight on Musk while not taking the “devastating” measure of forcing him out, said Steven Heim, a director at Boston Common Asset Management, which owns shares in Tesla battery maker Panasonic Corp.

Tesla must appoint an independent chairman, two independent directors, and a board committee to set controls over Musk’s communications under the proposed agreement. According to the SEC, Musk’s statements “falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote.”

Musk’s tweets caused the company’s stock price to jump by more than six percent on Aug. 7 and prompted significant market disruption, the SEC alleged. Instead, Musk proclaimed that funding for the transaction was “secured,” and that the only remaining uncertainty was a shareholder vote. The chairman of the SEC, Jay Clayton, took the unusual step of putting out his own statement after the settlement was announced Saturday, saying it is “in the best interests of our markets and our investors.” He stressed that the agency seeks to punish bad actions as a deterrence while not punishing investors for the sins of an executive.
Under the terms of a settlement with the U.S. Securities and Exchange Commission, Elon Musk and Tesla, Inc. agree to pay $20 million each to financial regulators, and Musk is expected to resign as chairman, but will remain as chief executive.