No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
Corporate Compliance Insights
Home Compliance

Activision Settlement Highlights Where Companies Often Go Wrong With Whistleblowers

Video game giant will pay $35 million to resolve SEC charges

by Katherine Krems
March 8, 2023
in Compliance
call of duty activision

The SEC has long relied on whistleblowers to enforce securities law, often making it worth their while to the tune of as much as 30% of a monetary sanction. Attorney Katherine Krems shares her insights on how Activision’s recent SEC settlement provides a lesson in what not to do.

On Feb. 3, the SEC announced a $35 million settlement with Activision Blizzard, creator of video games like Candy Crush and Call of Duty. The SEC alleges the company included an illegal provision in employee severance agreements that prohibited former employees from reporting information to the SEC unless they notified the company within 24 hours of the employee becoming aware of that obligation or request and that it failed to implement proper internal controls related to employee reports of misconduct.

These two allegations highlight important commission requirements employers often try to circumvent.

First, Exchange Act Rule 21(f)-17(a) prohibits any person or entity from impeding an individual from speaking directly with the agency about a potential violation of the securities laws. Between 2016 and 2021, however, Activision included in its standard separation agreements a provision that stated: “Nothing in this Separation Agreement shall prohibit … disclosures that are truthful representations in connection with a report or complaint to an administrative agency (but only if I notify the Company of a disclosure obligation or request within one business day after I learn of it and permit the Company to take all steps it deems to be appropriate to prevent or limit the required disclosure).” (emphasis added)

The SEC found that Activision’s requirement that employees sign such agreements illegally impeded employees from communicating directly with the commission about potential violations of securities laws. Although the SEC noted that it found no specific example where the illegal clause did prevent or interfere with a disclosure, the inclusion of the clause still violated SEC rules.

whistleblower congress
Cybersecurity

Blowing the Whistle: Exploring Federal Protections After Twitter Testimony

by Katherine Krems
September 28, 2022

Twitter’s been in the news of late thanks to Elon Musk’s (failed?) takeover bid, but another recent bit of Twitter news could be even more concerning for data privacy advocates.

Read more

Second, Exchange Act Rule 13a-15(a) requires that companies maintain effective controls over financial reporting and that those in a company who are responsible for financial reporting regularly assess the accuracy of such reports to the agency. 

Among other things, companies are required to report any factors that make investing in the company particularly risky. According to the commission, between 2018 and 2021, Activision knew that one of the main risk factors for its business was its ability to motivate, retain and attract employees. However, the company lacked adequate internal controls to track employee complaints of misconduct within its various, separate business units. 

Thus, Activision lacked adequate information about how many (and what kinds of) employee complaints of misconduct had been logged across the company, and it was unable to accurately assess whether any material issues requiring disclosure existed related to these complaints. Between 2020 and 2022, the company implemented several company-wide changes and policies that improved its management and tracking of employee complaints so that senior management and disclosure personnel became aware of these risks. Still, that was not enough to avoid liability.

The settlement with Activision raises two important points about companies’ obligations under the securities laws:

They cannot attempt to prevent a whistleblower from speaking with the SEC

The SEC whistleblower program has issued more than $1.3 billion in awards to whistleblowers since 2012. The program relies on whistleblowers to share information relevant to violations of the securities laws. A large part of the program’s success depends on whether potential whistleblowers feel empowered and enabled to speak out about fraud without fearing retaliation or otherwise being prevented from speaking with the SEC.

Although employers often try to require would-be whistleblowers (even those no longer employed) to disclose to the company any whistleblowing or reporting obligations to the SEC, this is illegal. Any attempt to prevent a whistleblower from speaking with the commission is likely a violation of the securities laws.

Employers may not require whistleblowers to inform them when they are going to the SEC or when they believe they have an obligation to do so. This is a clear violation of the commission’s rules because it interferes with the key role played by whistleblowers in initiating and assisting with investigations into violations of the securities laws.

Tracking complaints is important, especially when related to investment risk

Tracking and maintaining a record of employee complaints is always a good practice for employers to follow. Where retaining and motivating employees is an especially tenuous aspect of a company’s business, tracking and managing those complaints may relate to that company’s disclosure obligations under the securities laws.

Companies must assess and disclose those aspects of the business that make an investment in the business especially risky. Where a company does not maintain proper internal controls to adequately assess and maintain records of those risks, that entity may be in violation of the securities laws.


Tags: SECWhistleblowing
Previous Post

State of Business Credit Risk

Next Post

New DOJ Guidance Charts a Way Forward on Ephemeral Messaging

Katherine Krems

Katherine Krems

Katherine “Kate” Krems, an associate attorney with Kalijarvi, Chuzi, Newman & Fitch, P.C. in Washington, D.C., represents employees in discrimination, sexual harassment and whistleblower retaliation cases.

Related Posts

Syncing your ESG programme across the business: five tips for building ESG into your organisation

Syncing your ESG programme across the business: five tips for building ESG into your organisation

by Aarti Maharaj
February 9, 2023

In today's business landscape, there's a growing awareness of how ESG issues affect the bottom line. While companies are adopting...

esg sec clawback confusion

Unpacking the SEC’s Executive Compensation Clawback Rule

by John Peiserich
January 4, 2023

The SEC has finalized its long-awaited clawback policy mandated by the Dodd-Frank Act, issuing final rules that are scheduled to...

hottest takes

The Hottest Compliance Takes of 2022

by Staff and Wire Reports
December 14, 2022

Nobody was canceled for anything they wrote for our pages in 2022 — at least that we know of. But...

cci top 10 stories collage

Top 10 Compliance Stories of 2022

by Jennifer L. Gaskin
December 7, 2022

The more things change, the more they stay the same. This time last year, we summarized the top 10 ESG...

Next Post
Incentives to report FCPA violations greater than ever for compliance officers

New DOJ Guidance Charts a Way Forward on Ephemeral Messaging

Compliance Job Interview Q&A

Jump to a Topic

AML Anti-Bribery Anti-Corruption Artificial Intelligence (AI) Automation Banking Board of Directors Board Risk Oversight Business Continuity Planning California Consumer Privacy Act (CCPA) Code of Conduct Communications Management Corporate Culture COVID-19 Cryptocurrency Culture of Ethics Cybercrime Cyber Risk Data Analytics Data Breach Data Governance DOJ Download Due Diligence Enterprise Risk Management (ERM) ESG FCPA Enforcement Actions Financial Crime Financial Crimes Enforcement Network (FinCEN) GDPR HIPAA Know Your Customer (KYC) Machine Learning Monitoring RegTech Reputation Risk Risk Assessment SEC Social Media Risk Supply Chain Technology Third Party Risk Management Tone at the Top Training Whistleblowing
No Result
View All Result

Privacy Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2022 Corporate Compliance Insights

No Result
View All Result
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe

© 2022 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT