Lawyers said the settlement and size of the fine might give more ammunition to short-sellers pursuing separate cases against Musk for manipulating company shares through the August 7 tweet, as well as to a probe by the Justice Department.
Both Musk and Tesla will also have to pay 20 million-dollar fines.
As part of the settlement, the company will appoint a new independent chairman, two independent directors and control Musk's communications.
That settlement must still be approved by a court, and does not end the Justice Department probe disclosed by Tesla into Musk's tweets or lawsuits by short-sellers and other investors alleging losses and securities law violations. The SEC went on to hit Musk with fraud charges for reportedly making "false and misleading" statements.More news: Kavanaugh FBI Investigation Could Be Done Soon
And while it's bad news for Musk, people on Twitter have been quick to point out how a single tweet lost the world's leading electric auto company its visionary chairman. Musk initially vowed to fight the charges, but after Tesla's stock cratered on Friday, Musk backtracked and settled the case on Saturday. The agency also required that the company pay $20m in penalties to settle separate claims related to Musk's use of social media. The SEC also said that Tesla had not put any procedures in place to determine that Musk's tweets about the company were accurate or complete.
"The resolution is meant to prevent further market disruption and harm to Tesla's shareholders", Steven Peikin, co-director of the SEC's Enforcement Division, said in the statement. "Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact", the SEC claims. Tesla's showroom in Paramus, New Jersey, was closed by 8 p.m. local time Sunday.
Elon Musk was forced to step down as the chairman of Tesla over the weekend following a string of controversial tweets. The company and its fans made a strong push to get the cars to purchasers and prove that the hard phase Musk called "production hell" was coming to an end.