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Video game publisher Activision Blizzard (NASDAQ: ATVI) has settled out of court with the Securities and Exchange Commission (SEC) for violating extant rules on disclosures.

In a statement, the security watchdog said that Activision Blizzard violated the disclosure rules between 2018 and 2021 by skipping on the requirement for employees to voice out complaints. The SEC investigation also discovered that the company breached the commission’s whistleblower protection rule, amounting to “bad corporate governance.”

The securities regulator noted that Activision Blizzard was aware of the risks stemming from its inability to motivate and retain its employees but lacked the requirements to “collect and analyze employee complaints of workplace misconduct.” As a result, Activision’s top-level executives did not have enough information to determine whether certain matters would have elicited a public disclosure.

“The SEC’s order finds that Activision Blizzard failed to implement necessary controls to collect and review employee complaints about workplace misconduct, which left it without the means to determine whether larger issues existed that needed to be disclosed to investors,” Jason Burt from the SEC’s Denver Office, said.

“Moreover, 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,” he added.

Without challenging or admitting to the claims, the SEC statement revealed that Activision Blizzard paid the $35 million penalty while agreeing to a cease-and-desist order on the violations.

Since the announcement of the settlement, Activision Blizzard’s stock fell by 2.43% to trade at $75.24 per share.

Planned acquisition by Microsoft rattles the gaming industry

Microsoft’s (NASDAQ: MSFT) planned acquisition of Activision Blizzard had sparked a frenzy in the video game industry, with a cross-section of gamers kicking against the move. Regulators on both sides of the Atlantic also oppose the move, alleging that it violated existing antitrust rules.

Not deterred by the mounting opposition, Microsoft is bracing itself to challenge the regulatory opposition in the European Union and the U.K. courts. A report from the New York Times claimed the company would be willing to offer concessions to regulators to give the green light for its Activision Blizzard takeover.

“Microsoft hopes to convince both Britain and the European Union to accept its concessions and approve the deal, which could make it easier for the company to reach an agreement with the FTC before the scheduled administrative trial starts in the summer,” a company insider said.

Watch: Small Payments, Big Fun – Micropayments for Casual Games

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