Tesla Trades Higher After Judge Approves Musk's SEC Settlement

Tesla Inc TSLA CEO Elon Musk and a U.S. federal judge finalized an agreement Tuesday morning to settle allegations of fraud.

What Happened

The Securities and Exchange Commission alleged Musk committed fraud when he wrote a Tweet suggesting funding has been secured to take the company private. The two parties reached an agreement last week, which has now been approved U.S. District Judge Alison Nathan in Manhattan.

Musk will personally pay a $20 million fine and Tesla will pay a similar fine. The deal also calls for Musk to remove himself as Tesla chairman within 45 days and can't be re-appointed for a minimum of three years.

In addition, Tesla needs to create a system where Musk's communications to the public are monitored, including social media platforms and Twitter blog posts.

Why It's Important

Reaching an agreement with lawmakers and regulators is a positive development for Tesla. The agreement comes at a time when the auto maker is ramping up production and deliveries of its Model 3 car and needs to reassure customers its outlook is sustainable and profitable.

What's Next

Shares of Tesla gained more than 3.5 percent to $268.72, a potential sign investors are satisfied with the agreement and the company can better focus on its outlook.

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