The Securities and Exchange Commission on Monday defended its decision to settle with billionaire Elon Musk over his delayed disclosure of a stake in Twitter, now known as X, after a federal judge questioned the agreement.

The SEC announced in May that it had reached a settlement requiring Musk to pay $1.5 million to resolve allegations that he failed to timely disclose his growing ownership in the social media company. The settlement came after Musk accumulated more than 5% of Twitter's stock in early 2022 but did not file required disclosure forms within the mandated 10-day period.

During court proceedings, the presiding judge raised questions about the terms of the settlement agreement, prompting the SEC to provide additional justification for the resolution. In its defense, the commission characterized the agreement as reflecting necessary "compromises" in the enforcement process.

The case stems from Musk's acquisition of Twitter shares beginning in January 2022, which eventually led to his $44 billion takeover of the company later that year. Federal securities law requires investors to disclose when they acquire more than 5% of a publicly traded company's shares within 10 days of crossing that threshold.

The delayed disclosure potentially allowed Musk to continue purchasing shares at lower prices before the market became aware of his significant stake. The settlement represents one of several regulatory challenges Musk has faced related to his social media and business communications.