(Reuters) - Tesla Inc TSLA.O Chief Executive Officer Elon Musk refused to pay a nominal fine and give up the role of chairman for two years as part of a settlement with the U.S. Securities and Exchange Commission, CNBC reported on Friday, citing sources.

FILE PHOTO: Tesla Chief Executive Office Elon Musk speaks at his company's factory in Fremont, California, U.S., June 22, 2012. REUTERS/Noah Berger/File Photo

The settlement would also require Tesla to appoint two new independent directors, the report said.

Musk reportedly refused to sign the deal as he felt by settling he would not be truthful to himself and he wouldn’t have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the report said.

Tesla did not immediately respond to a request for comment.

“I’m not sure if they can settle with the SEC after turning down the opportunity, but you never know,” Ivan Fienseth, an analyst with Tigress Financial Partners said.

The SEC on Thursday filed a lawsuit against Musk accusing him of fraud and sought to remove him from his role saying he made a series of “false and misleading” tweets about potentially taking the company private.

Shares of Tesla dived 11 percent on Friday as Wall Street worried the lawsuit could force Musk to step down and make it difficult for the loss-making carmaker to raise more capital.

Several worried that the SEC action was also just the beginning of a legal battle with authorities, short sellers and other investors over Musk’s actions that could cost Tesla heavily.

“The SEC civil action may lead to Musk’s exit from Tesla (either permanently or temporarily) and the Musk premium in the shares dissipating,” Barclays analyst Brian Johnson said.

Musk, 47, is the public face of Tesla, and has driven it to the verge of profitability with a costly ramp-up of production of its Model 3 sedan over the past year.

The Silicon Valley billionaire, who within three weeks of the tweets had abandoned the plan to delist Tesla, said overnight he had done nothing wrong and the company’s board reiterated its support for him.

“It will be too damaging to Tesla for him to be removed fully,” Fienseth said.

“In order for Tesla to raise money I think investors will want Musk to stay involved but have more controls in place.”

Shares were last down 11.2 pct at $273, wiping about $6 billion off Tesla’s market value.