On February 3, 2023, the U.S. Securities and Exchange Commission (SEC or Commission) settled an enforcement action against Activision Blizzard Inc. (Activision), a publicly traded video game development and publishing company.1 The SEC charged Activision with (i) failing to maintain disclosure controls and procedures to ensure the company could assess whether its disclosures pertaining to its workforce were adequate and (ii) violating the Dodd-Frank Act whistleblower protection rules by having former employees sign separation agreements requiring them to notify the company of disclosure obligations or requests from government agencies. Activision agreed to pay a $35 million penalty to settle the charges.
The action is notable because it shows the SEC’s willingness to charge violations of the disclosure controls and procedures provision in Rule 13a-15(a) without claiming that an issuer’s disclosures were materially misleading. Such an expansive reading of Rule 13a-15(a) could have a meaningful impact on issuers.
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