Elon Musk is out as the chairman of Tesla Inc., but will remain chief executive, as part of a settlement of a lawsuit filed by the U.S. Securities and Exchange Commission that threatened to ban him as a director or executive of any public company.

The suit, filed in federal district court in the Southern District of New York Thursday, alleged that Musk violated antifraud provisions of federal securities laws when he posted on Twitter Aug. 7 that he had funding secured to take Tesla private at $420 per share.

The SEC did not hold back and was seeking a permanent injunction, disgorgement, civil penalties and a bar prohibiting Musk from serving as an officer or director of a publicly held company.

Under the settlement agreement, Musk has agreed to stand down as Tesla chairman and must be replaced by an independent chairman. In addition, Musk can’t be reelected chairman for three years. Tesla is required to appoint two independent directors to its board and put in place additional controls and procedures to “oversee Musk’s communications,” the latter implying Musk’s use of Twitter.

Lastly, both Tesla and Musk have been fined $20 million each, with the funds to be distributed to harmed investors under a court-approved process.

“This matter reaffirms an important principle embodied in our disclosure-based federal securities laws,” SEC chairman Jay Clayton said in a statement. “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,” Clayton added.

The quick turnaround from lawsuit to settlement has not gone unnoticed. Carl Tobias, a law professor at the University of Richmond School of Law, told CNBC that it may be the quickest SEC settlement in history and one that allows both sides to claim a semblance of victory.

“It was better for each to compromise and not drag out this dispute,” Tibas noted. “All secured something they wanted and gave up something.”

Tesla and Musk are still facing a lawsuit from Andrew Left of Citron Research over the Aug. 7 tweet.

Whether the “additional controls” agreed to be put in place to oversee Musk’s communications will be effective is yet to be seen. From smoking pot on the Joe Rogan Experience (pictured) to rallying against killer robots, Musk, who describes himself as bipolar, has grown more and more erratic this year.

The culmination of that behavior came when he accused Vern Unsworth, one of the heroes of the Thai soccer team rescue earlier in the year, of being a pedophile, without citing any evidence. Unsworth is suing Musk over the matter, but it’s Musk’s behavior in making the accusation to begin, along with other odd behavior, that has investors starting to question his ongoing suitability to lead Tesla.

Photo: Joe Rogan Experience/YouTube