Detroit: Elon Musk has rejected a settlement that would have allowed him to pay a small fine and stay on as CEO of Tesla, according to a person knowledgeable about talks between the electric car company and federal securities regulators.

The person, who asked not to be identified because the negotiations were private, said Friday that Musk rejected the offer because he didn't want a blemish on his record.

On Thursday the US Securities and Exchange Commission filed a civil complaint in U.S. District Court in Manhattan seeking to oust Musk and alleging that he committed securities fraud with false statements about plans to take the company private.

To stay on as CEO, the person said that Musk would have had to agree to conditions including restrictions on when he could release information publicly.

The SEC said in its complaint that Musk falsely claimed in an Aug. 7 tweet that funding had been secured for Tesla Inc. to go private at $420 per share, a substantial premium over the stock price at the time.

The SEC now wants a "bar prohibiting Musk from serving as an officer or director of a public company." It also is asking for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties.

Shares tumbled 12 per cent at the opening bell Friday.

The bombshell announcement that federal regulators are seeking to oust Elon Musk as CEO and chairman at Tesla is pushing shares even lower before the opening bell. (AP)

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