The SEC announced on February 3, 2023 a settled enforcement action against Activision Blizzard, Inc., finding that it failed to have adequate controls for reporting widespread workplace misconduct to management and used separation agreements for employees that impeded whistleblowing in violation of SEC rules.[1]
Disclosure Controls and Procedures Failures
The SEC’s order says that between 2018 and 2021 Activision Blizzard lacked controls and procedures among its separate business units to collect and analyze employee complaints of workplace misconduct. Activision faced a number of employee complaints and in 2022 agreed to an $18 million consent decree with the Equal Employment Opportunity Commission (EEOC) related to alleged sexual harassment, pregnancy discrimination, and retaliation. Because of Activision Blizzard’s lack of controls and procedures, management of the company was not able to properly understand the extent of workplace misconduct and so did not assess whether public disclosure of those issues was required. This was the case even though Activision Blizzard identified the importance of attracting and retaining qualified personnel as a risk factor.
This is not the first time that the SEC has responded to a company’s experiencing operational problems that were not timely disclosed by characterizing the circumstances as a failure to maintain adequate disclosure controls and procedures.[2]
Protecting Whistleblowers
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