Lessons For Public Companies' Disclosure Controls From Recent SEC Enforcement

The SEC's Division of Enforcement has increasingly put the spotlight on disclosure controls- the processes that public companies use to collect information for disclosures in their public filings. The agency recently charged video game maker Activision Blizzard Inc.with a failure to maintain disclosure controls, a charge that came in the aftermath of a public controversy concerning widespread allegations of workplace misconduct at the company. The charging decision has been subject to criticism-including from one of the SEC's own Commissioners-because the SEC did not allege that the content of the company's disclosure had been deficient in any respect. A review of Activision Blizzard and earlier cases in which the SEC has pursued disclosure controls-based enforcement actions provides valuable lessons for public companies in evaluating and improving the quality of their own disclosure controls.