Activision to pay US$35 million for disclosure control failures

ACTIVISION Blizzard, the video game company that Microsoft is proposing to buy for US$69 billion, is settling federal charges that it failed to put in place proper procedures to address complaints of workplace misconduct.

According to the Securities and Exchange Commission (SEC), Activision Blizzard’s management didn’t fully understand the magnitude of employee complaints’ about workplace misconduct because the company lacked the proper controls. It thus failed to assess whether any material issues existed that would’ve required public disclosure. An SEC order also found that Activision Blizzard violated federal whistleblower protections by requiring former employees to provide notice to the company if they received an SEC request for information.

“Taking action to impede former employees from communicating directly with the Commission staff about a possible securities law violation is not only bad corporate governance, it is illegal,” Jason Burt, director of the SEC’s regional office in Denver, said in a statement.

The SEC said Activision Blizzard agreed to a cease-and-desist order and to pay a US$35 million penalty without admitting or denying the agency’s findings.

Activision has been shrouded in controversy since 2021 when a state agency filed a sexual harassment lawsuit against the Santa Monica, California-based company, describing its “frat boy culture” and accusing its leadership of failing to take action. That prompted the SEC to launch its own investigation into how the company handled the reports of misconduct. Microsoft’s planned purchase of Activision Blizzard is meanwhile facing several regulatory reviews.

Activision Blizzard said it’s “pleased to have amicably resolved this matter” and that it has “enhanced” its disclosure processes. BLOOMBERG