Recent SEC Settlement Against Activision Blizzard Emphasizes That SEC Whistleblower Claims Cannot be Waived

May 5, 2023

On February 3, 2023, the SEC announced a $35 million settlement with Activision Blizzard, Inc., settling, among other things, allegations that the company violated SEC whistleblower protection rules. The SEC’s order serves as a reminder that employees have a legal right to report their concerns to the SEC when they suspect violations of the securities laws, and that the SEC will use its enforcement authority to keep whistleblower lines of communication open.

The SEC’s enforcement action was based on alleged violations of SEC Rule 21F-17(a), which prohibits companies from taking any action that impedes reporting to the SEC. The SEC has taken a broad view of what it means to impede reporting to the Commission. For example, the SEC has settled cases under the anti-impeding rule for: confidentiality agreements that prohibit disclosure of confidential information without prior written authorization from the company, prohibiting employees from discussing company internal investigations without prior company authorization , and accessing a whistleblower’s personal accounts stored on a work computer among others.

In this case, according to the SEC’s order, Activision Blizzard had language in its template separation agreement that violated the rule. A separation or severance agreement is a contract that employers may ask employees to sign when leaving the company, usually seeking a release of all legal clams in exchange for some monetary payment. In this case, the SEC’s order stated that Activision Blizzard had a clause in its separation agreement that allowed former employees to provide “truthful representations” to administrative agencies (like the SEC), “but only if” they notified the company within one business day of any request for information from such an agency. In other words, whistleblowers could communicate with the SEC, but if the SEC asked for any information, the whistleblowers had to tell the company or risk violating the separation agreement.

The SEC order contends that this clause violated Rule 21F-17(a) and impeded reporting to the Commission. In early 2022, Activision Blizzard removed the offending clause from its separation agreements.

The important takeaway for employees being offered separation agreements is that you cannot waive your right to report to the SEC and potentially to collect a reward, and a company cannot stop you from doing so. However, other whistleblower reward statutes, like the False Claims Act, do not have the same expansive protections, and a separation agreement might require you to waive your right to collect a reward in some situations.

Because whistleblowers often experience retaliation as soon as they start raising concerns to their supervisors, and because the law surrounding whistleblower rewards is complex, it is important to reach out to an experienced whistleblower attorney if you’ve identified potential wrongdoing. Everyone’s situation is different, and the risks and rewards must be weighed carefully against each other. If you are thinking about becoming a whistleblower, you can contact attorneys at Outten & Golden’s whistleblower and retaliation practice.

(*Prior results do not guarantee a similar outcome.)