Elon Musk has agreed to step down as chairman of Tesla’s board for three years as part of an agreement with the SEC to resolve a securities fraud case. He will also pay a $20 million fine, the New York Times reported.
Tesla and Musk became the subject of an SEC lawsuit for fraud and misleading investors two days ago as a result of Musk’s Aug. 7 tweet that he had “funding secured” for a buyout of the tech company at $420 per share.
Per the terms of the agreement, Musk will remain CEO. Tesla will also pay an additional $20 million fine.
Musk had rejected a less restrictive deal on Thursday, according to the Times’ sources, which would have seen him banned from serving as chairman for two years and paying a $10 million fine. It is unclear why he changed his mind.
Tesla will add two independent directors and take steps to monitor Musk’s communications with investors, as well as creating a permanent committee of independent directors to monitor disclosures and potential conflicts of interest. Musk neither admitted to nor denied misleading shareholders as part of the settlement of the civil fraud charge.
On Friday, Tesla’s shares dropped 13% after the lawsuit was made public.