Tesla CEO Elon Musk has been forced to step down as the company’s chair and pay a fine over tweets that he wanted to take the company private.

It follows Thursday’s decision by the Securities and Exchange Commission (SEC) to sue Mr Musk for alleged securities fraud.

The fraud allegation relates to his August tweet in which Mr Musk said he was considering taking electronic car maker Tesla off the stock market and into private ownership.

He wrote he had “funding secured” for the proposal, which would value Tesla at $420 per share. Shares in the company briefly rose after his announcement, but later fell again.

The SEC said those claims were “false and misleading”.

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

Under the deal, Mr Musk will remain as Tesla CEO but has to step down as chairman for three years.

Both he and Tesla will also have to pay a $20m (£15m) fine.

The SEC’s chairman Jay Clayton said that he supported the deal, and felt that it was in the best interests of US markets and investors, including the shareholders of Tesla.

“This matter reaffirms an important principle embodied in our disclosure-based federal securities laws,” he said.

“Specifically, when companies and corporate insiders make statements, they must act responsibly, including endeavouring 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.”