Both he and Tesla will also have to pay a $20m (£15m) fine.
Tesla CEO Elon Musk and the electric auto company have agreed to pay a total of $40 million and make a series of concessions to settle a government lawsuit alleging Musk duped investors with misleading statements about a proposed buyout of the company.
Things could ultimately have been significantly worse for Musk, as the SEC had sought to bar him from serving as an officer or board member of a publicly traded company. Neither Musk nor Tesla admitted or denied the SEC's findings as part of the settlement.
In the tweets to his 22 million followers, he suggested he would take Tesla private at $420 per share - a substantial premium to its trading price at the time. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.
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According to the terms of the settlement, Musk will pay a $20 (£15.3 / €17.2) million fine and these funds will be "distributed to harmed investors under a court-approved process".
It noted that the tweets caused significant market disruption. Musk will also be forced to step down from his position of as Tesla Chairman.
"In truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies", wrote the SEC, which had filed fraud charges earlier this week. Tesla did not immediately respond to a request for comment and Musk could not immediately be reached for comment. Tesla is required to appoint two new independent directors to its board.