SEC Settles Enforcement Action Against Activision Blizzard

In February 2023, the Securities and Exchange Commission settled an enforcement action against Activision Blizzard Inc., a publicly traded video game company. The SEC accused Activision of failing to maintain disclosure protocols and procedures to ensure their workforce disclosures were adequate. Activision was also accused of violations of the Dodd-Frank Act, when they required employees to sign separation agreements requiring them to notify the company of disclosure obligations or requests stemming from government agencies. Activision agreed to pay $35 million.

What does this mean for whistleblowers?

Essentially, Activision wanted to attract new employees, while retaining and motivating their existing workforce. However, it lacked certain controls and procedures to analyze employee complaints regarding workplace misconduct. The company’s management didn’t have enough information to understand whether there were any issues that would have required public disclosure under the Exchange Act rules. Furthermore, when employees were terminated, they were asked to sign separation agreements. These agreements required the former employee to provide notice to Activision if they received a request for information from the SEC.

The SEC’s enforcement action shows that the agency is broadly interpreting disclosure controls and procedures under statutes. In fact, an issuer’s disclosures “need not be materially misleading” to find violations. Furthermore, requiring employees to report contact from the SEC after their employment has ended is illegal. This inhibits employee whistleblower protections, which in turn disincentivizes employees or former employees to speak up.

Employers should consider whether their employment policies and agreements may also interfere with whistleblower protections. They may also want to provide information about whistleblower protections directly to the employees, lest they run afoul of SEC rules.

If you’ve witnessed illegal workplace activity, consider blowing the whistle. Cases like Activision’s require an experienced and dedicated whistleblower attorney—someone who is willing to take a deep dive to help ferret out violations. A knowledgeable whistleblower attorney at Kardell Law Group can help. Call today for a consultation.