Tesla CEO Musk Settles With US Securities Regulator in Fraud Case - Statement

"The Securities and Exchange Commission announced today that Elon Musk, CEO and Chairman of Silicon Valley-based Tesla, Inc., has agreed to settle the securities fraud charge brought by the SEC against him last week," the statement released on Saturday said.

READ MORE: Tesla CEO Elon Musk Calls US Regulator's Accusations of Fraud ‘Unjustified'

According to the agreement reached by Musk and the SEC, the entrepreneur will have to step down as Tesla's chairman and will not be able to hold this post for at least three years, but will remain as the company's CEO. Musk is due to be replaced by an independent chairman, while two new independent directors should be appointed to Tesla's board.

In addition, Musk and Tesla will have to pay a penalty worth $20 million each in compensation to harmed investors.

On Thursday, SEC filed a lawsuit against Musk for fraud, citing his public statements on taking the company private, which caused "confusion and disruption" in the stock market and harmed investors. The regulator among other recommendations has asked a federal judge to prevent Musk from serving as a head of a public company.

On August 7, Musk via Twitter said he could take the California-based company private at a price of $420 per share just as the stock was trading at around $358 per share. Tesla’s stock price increased by more than six percent from the time of Musk's tweet until the close of trading that day on the NASDAQ exchange.