Statement Regarding Agreed Settlements With Elon Musk and Tesla

Today, the Commission announced agreed settlements with Elon Musk and Tesla.  Mr. Musk is the Chairman and CEO of Tesla and is the company’s largest stockholder, owning approximately 22% of its outstanding shares.  The details of the agreed settlements, which remain subject to court approval, are available here.  This matter has been widely followed by our Main Street investors and I believe comment[1] on several matters is appropriate:

This past Thursday, after the completion of a thorough investigation and following dialogue with representatives of Mr. Musk and Tesla, the Commission filed an action against Mr. Musk in federal district court.  I fully supported the filing of the action.

I also fully support the settlements agreed today and believe that the prompt resolution of this matter on the agreed terms, including the addition of two independent directors to the Tesla board and the other governance enhancements at Tesla, is in the best interests of our markets and our investors, including the shareholders of Tesla.

This matter reaffirms an important principle embodied in our disclosure-based federal securities laws.  Specifically, when companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading and do not omit information a reasonable investor would consider important in making an investment decision.

Speaking more broadly about the SEC’s enforcement efforts that involve the misconduct of officers, directors and companies, it often is the case that the interests of ordinary shareholders — who had no involvement in the misconduct — are intertwined with the interests of offending officials and the company.  For example, corporate fines often are financed with funds that could otherwise benefit shareholders, and the skills and support of certain individuals may be important to the future success of a company.  At the Commission, the interests of ordinary investors are at the front of our minds and, in matters involving misconduct, we seek to serve those interests to the extent practicable while also ensuring that we remediate and deter misconduct.  In addition, holding individuals accountable is important and an effective means of deterrence.  I believe the settlements agreed today reflect these multiple interests and considerations.

In closing, I commend the Division of Enforcement for their prompt, professional and thorough work on this matter, and I thank the staff in the Division of Corporation Finance and the many other members of the Commission, including my fellow Commissioners, who devoted substantial time and attention to this matter.