RIO DE JANEIRO (Reuters) - Brazil's securities industry watchdog on Tuesday cleared Petroleo Brasileiro SA PETR4.SA, former executives and advisers of wrongdoing over alleged irregularities in a $70 billion capital injection seven years ago that sparked a long decline in shares of the state-controlled oil producer.

The logo of state-run oil company Petrobras is pictured in the company headquarters in Vitoria, Espirito Santo, Brazil, February 10, 2017. REUTERS/Paulo Whitaker

Three board members of the watchdog known as CVM voted to absolve Petrobras, former Chief Executive Officers José Sergio Gabrielli and Maria das Graças Foster, arguing the company did not act in bad faith.

CVM also exonerated an executive at underwriter Banco Bradesco SA and the bank itself.

Regulators had been investigating whether Petrobras deceived minority shareholders by presenting misleading information to them in the offer, the world’s largest ever follow-on stock offering, which took place in September 2010.

Tuesday’s ruling put an end to an episode that sparked doubts over the company’s business model and triggered $100 billion in market value losses that grew with a drop in oil prices and fallout from a massive corruption probe.

At the time, Petrobras raised the money to buy the right to exclusively explore a subsea oil area known as pre-salt from Brazil’s federal government and help fund a $225 billion, five-year investment plan, the oil industry’s largest at the time.

Petrobras ended up paying more for the so-called transfer of rights than it fetched from the offering, forcing the company to borrow considerably until it posted two years of consecutive losses. Petrobras is nowadays the world’s most indebted major oil firm.

Preferred shares PETR4.SA, the company's most widely traded class of stock, added 2.9 percent to 12.33 reais on Tuesday.

At issue in the case were 50 billion reais ($15 billion) in preferred shares which, according to the offering’s prospectus, could be swapped for voting stock should Petrobras pay out dividends in three consecutive years.

However, after Petrobras reported a loss of 21.7 billion reais in 2014, new management at the company said that the preferred shares would never have voting rights.

CVM subsequently opened a case to hold those responsible accountable. Last October, CVM rejected a settlement proposal by Petrobras which would have included the payment of over 1 million reais.

($1 = 3.2542 reais)