Tesla CEO Elon Musk

Tesla (TSLA - Get Report) CEO Elon Musk on Saturday, Sept. 29, agreed to settle with the Securities and Exchange Commission over a complaint that the automaker's founder violated federal securities laws with several tweets pertaining to a take-private offer for Tesla. 

Musk will remain as CEO of the company but will step down as chairman of the board for at least three years.

Musk has also agreed to pay a civil penalty of $20 million.

The SEC also fined Tesla $20 million and said the company needed to add two independent directors.

"The total package of remedies and relief announced today are specifically designed to address the misconduct at issue by strengthening Tesla's corporate governance and oversight in order to protect investors," said Stephanie Avakian, Co-Director of the SEC's Enforcement Division, in a statement. 

"Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC's allegations," the SEC statement added.

On Aug. 7, Musk tweeted that he was considering taking Tesla private at $420 and that he had secured funding for the transaction. 

Musk made the tweets without discussing their content "with anyone else prior to publishing them," the SEC alleged in its complaint . They surprised even Tesla's head of investor relations, who sent a text message to Musk's chief of staff asking if Musk's statement was "legit."

The agency sought to bar Musk from acting as an officer or director of a public company, "disgorge any ill-gotten gains" he made from the tweet and pay an unspecified amount in civil penalties. Tesla stock jumped 6% on the tweet, which went out to Musk's 22 million followers, meaning that the damages in the case could be enormous given the company's market capitalization of over $50 billion.

While Musk conveyed certainty with his tweet, in reality, he "had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the SEC alleges in its 23-page complaint, which provides detail on a buyout process that seemed implausible from the start.

Tesla shares rocketed after Musk's tweets to as high as $387.46 a piece. 

Shares closed down Friday about 14% to $264.77 apiece as investors continued to contemplate the future of the company and its founder. 

Editor's Note: This story is developing and may be updated