The settlement comes just two days after the SEC sued Musk for fraud and sought to block the way of entrepreneur from running affairs of Tesla or any other publicly-traded company. Neither Musk nor Tesla admitted or denied the SEC's findings as part of the settlement.
Musk and Tesla must each pay $20 million in fines, which will be distributed to traders who were harmed by the tweets.
The complaint alleged that Mr Musk made "false and misleading statements" about plans to take the company private in August.
As part of the settlement, Tesla will appoint an independent chairman, two independent directors, and a board committee to set controls over Musk's communications under the proposed agreement.
Loup Ventures Managing Partner Gene Munster noted that the SEC settlement is the best outcome possible from Elon Musk's "funding secured" fiasco. Tesla's Denver drivers' club president Sean Mitchell said on Twitter that a team of "30 volunteers were providing 40 [plus] hours helping deliver and teach new owners" about the cars' different features. Musk won't be eligible to be re-elected as chairman for three years. The tweets had no basis in fact, and the ensuring market chaos hurt investors, the SEC said.
He arrived at the $420 a share figure by assuming a 20 percent premium on Tesla shares and rounding up one dollar because "he had recently learned about the number's significance in marijuana culture", and to impress his girlfriend, according to the SEC's complaint. "The resolution is meant to prevent further market disruption and harm to Tesla's shareholders".
Tesla analyst Garrett Nelson of CFRA Research upped his rating on the stock Monday morning to Hold, after downgrading it on Friday to Sell.
The settlement with the SEC won't be the end of the matter, though, as Musk is also facing a series of class action lawsuits relating to the tweets. Some analysts had said that Musk's departure would harm Tesla's brand, fundraising abilities and stakeholders' confidence if the company lost its key visionary.