Activision Blizzard Agrees to $35 Million Settlement with SEC Over Disclosure Controls and Whistleblower Protection

Strategic Insights -

As part of a broader probe into workplace misconduct allegations, the US Securities and Exchange Commission (SEC) has found Activision Blizzard, Inc. to have failed in maintaining adequate disclosure controls and violating an SEC whistleblower protection rule. The company has agreed to pay a $35 million settlement, marking the end of a high-profile investigation. The SEC's order highlights the importance of human capital disclosures, including the "Social" aspects of Environmental, Social and Corporate Governance (ESG) issues, and demonstrates the Commission's focus on enforcing whistleblower protection laws.

Key Takeaways:

  • Activision Blizzard has agreed to pay a $35 million settlement with the SEC over charges of failure to maintain adequate disclosure controls and violating an SEC whistleblower protection rule.
  • The SEC's order emphasizes the importance of human capital disclosures, including the "Social" aspects of ESG issues, and demonstrates the Commission's focus on enforcing whistleblower protection laws.
  • The case highlights the importance of issuers maintaining proper disclosure controls and procedures, including the collection and assessment of employee complaints, to ensure accurate risk factor disclosures.
  • The SEC's action against Activision also underscores the need for companies to review separation and employment agreements to ensure compliance with whistleblower protection laws.
  • Companies should conduct risk assessments to test that internal tips and complaints are being properly reviewed and investigated, and should test internal whistleblower reporting procedures and disclosure controls to ensure that complaints are communicated to disclosure personnel.

Statistics:

  • $35 million: The amount Activision Blizzard has agreed to pay in settlement with the SEC.
  • 2018-2021: The period during which Activision failed to maintain adequate disclosure controls and procedures, according to the SEC's order.
  • 2021: The year in which the Wall Street Journal first reported on the SEC investigation into Activision's disclosures regarding employee sexual misconduct and discrimination allegations.
  • 35 million: The number of possible SEC whistleblower tip-enabling cases, as discussed in a recent article by Jane Norberg, former Chief of the SEC's Office of the Whistleblower.
  • 2016-2021: The period during which most separation agreements executed by Activision contained language potentially impeding whistleblower reporting.

Sources:

  • Order from the US Securities and Exchange Commission, dated February 3, 2023.
  • Arnold & Porter Advisory, available here.
  • Arnold & Porter article, available here.
  • Activision Blizzard, Inc. SEC filings (2021).
  • The Wall Street Journal, September 2021.
  • Arnold & Porter article, available here.
  • Arnold & Porter advisory article, available here.
  • SEC Commissioner Hester M. Peirce dissenting opinion, dated February 3, 2023.