Under the agreement with the Securities and Exchange Commission (SEC), Musk and the company each will pay a $20m penalty, and Musk will be barred from serving as chairperson for at least three years. In the settlement, Elon Musk is to pay a $20 million fine and Tesla will also pay a similar amount separately, totalling the fines to $40 million.
Elon Musk was forced to step down as the chairman of Tesla over the weekend following a string of controversial tweets.
Tesla has also agreed to appoint two new independent directors to its board, establish a new committee of independent directors and put in place additional controls over Musk's communications. "The resolution is meant to prevent further market disruption and harm to Tesla's shareholders".
Lawyers say the settlement and size of the fine may give more ammunition to short-sellers pursuing separate cases against Musk for manipulating the company's shares as well as to a probe by the Justice Department.
In the immediate aftermath of the "funding secured" tweet, Tesla stock rose by six per cent.
The release did not directly address the lots full of Tesla cars that have reportedly filled up around the country, from the San Francisco Bay Area to Los Angeles, Seattle, Las Vegas, Salt Lake City, Dallas, and Chicago, as The New York Times reported Tuesday.
However, Musk has agreed to a condition where he will not admit nor deny if he was guilty of committing the securities fraud.
"We view Elon Musk and Tesla's settlement with the SEC as a positive change, as it should improve corporate governance and allow (an) investor focus squarely on operations", Canaccord Genuity analyst Jed Dorsheimer said. There remain significant opportunities to grow the addressable market for Model 3 by introducing leasing, standard battery and other lower-priced variants of the vehicle, and by starting global deliveries.
The tweet suggested Musk would take Tesla off the stock market.