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Tesla CEO Elon Musk would step down as the company’s chairman and be replaced by an independent chairman under a proposed settlement with the Securities and Exchange Commission, the agency announced Saturday.

"Musk and Tesla have agreed to settle the charges against them without admitting or denying the SEC’s allegations," the commission said in a statement. Musk will remain as Tesla's CEO under the deal, CNBC reported.

The proposed settlement agreement, which includes other stipulations, is subject to court approval. The SEC sued Musk on Thursday alleging that the billionaire tech entrepreneur misled the market when he tweeted last month that he had "funding secured" to take the electric car maker private.

The settlement requires that Musk remain ineligible to be re-elected as chairman for three years and for Tesla and Musk to pay $20 million each in penalties. “The $40 million in penalties will be distributed to harmed investors under a court-approved process,” according to the SEC.

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It also stipulates that Tesla will appoint two new independent directors to its board, the company will establish a new committee of independent directors, and put in place additional controls and procedures to oversee Musk’s communications, the SEC said.

"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," Stephanie Avakian, co-director of the SEC's enforcement division, said in the statement.

"As a result of the settlement, Elon Musk will no longer be Chairman of Tesla, Tesla’s board will adopt important reforms—including an obligation to oversee Musk’s communications with investors—and both will pay financial penalties," Steven Peikin, co-director of the SEC's enforcement division, said in the statement. "The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders."

Musk, 47, said on Twitter on Aug. 7 that he was considering taking Tesla private and that funding was "secured" for such a deal.

The SEC said in its suit that the comments were "false and misleading" because it was not certain that Musk would be able to pull the deal together.

"In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the agency said.

SEC Chairman Jay Clayton said in a statement Saturday that he supports the settlements and that they are in the best interests of markets and investors, including Tesla shareholders.

"This matter reaffirms an important principle embodied in our disclosure-based federal securities laws," Clayton said. "Specifically, when companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading and do not omit information a reasonable investor would consider important in making an investment decision."