Securities law experts say that the U.S. Securities and Exchange Commission’s recent settlement with Tesla’s Elon Musk is proof that the agency is getting tougher on corporate regulation of executives.
This past weekend, Musk agreed to settle the securities fraud SEC charges against him last week by stepping down as chairman of Tesla, as well as paying a $20 million fine.
Musk will be allowed to stay as CEO but must leave his role as chairman of the board within 45 days and cannot seek reelection for three years. He accepted the deal with the SEC “without admitting or denying the allegations of the complaint.”
In addition, Tesla agreed to pay $20 million to settle SEC claims that it failed to adequately police Musk’s tweet.
“The $40 million in penalties will be distributed to harmed investors under a court-approved process,” the SEC said in a press release.
According to Reuters, experts note that this deal is proof that the SEC is not just coming down on corporations, but also on their executives. In fact, the SEC announced charges or penalties against eight corporate officials at six companies last week, emphasizing a focus on personal wrongdoing that has gained steam under SEC chairman Jay Clayton.
“Clayton is focused on holding individuals liable and not just corporate entities,” said Mary Hansen, who worked in the SEC’s enforcement division for eight years. “The public wants to see our law enforcement, whether it be civil or criminal, hold those individuals responsible. That’s what is driving this focus on individual liability.”
Last week, the SEC brought action against the former president and chief financial officer of LendingClub Asset Management, Renaud Laplanche and Carrie Dolan, and the former CEO and CFO of Walgreens Boots Alliance, Gregory Wasson and Wade Miquelon.
“Holding individuals accountable is important and an effective means of deterrence,” Clayton said in statement on Saturday.