Unity Software Discloses Possible Sanctions Violations in IPO Filing to SEC
A gaming software company said it may have violated U.S. sanctions and export reporting requirements, according to its regulatory filing with the Securities and Exchange Commission. Unity Software, based in California, told the SEC it voluntarily disclosed possible export and sanctions violations to the Bureau of Industry and Security and the Office of Foreign Assets Control in August. The SEC filing, dated Aug. 24, is a registration statement ahead of the company's eventual initial public offering.
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The company didn't provide much detail about the possible violations. “Although we have taken precautions to prevent our platform from being provided, deployed or used in violation of export control and sanctions laws, and are in the process of further enhancing our policies and procedures relating to export control and sanctions compliance, we have inadvertently provided products and services to some customers in apparent violation of U.S. export control and economic sanctions laws,” the company said. “If we or our resellers fail to obtain appropriate import, export, or re-export licenses or permits, we may also be adversely affected through reputational harm, as well as other negative consequences, including government investigations and penalties.”
Unity also said that the U.S. regulatory requirements could be a limiting factor for the company's global competitiveness. Unity's business is subject to OFAC rules “that prohibit the shipment of most solutions to embargoed jurisdictions or sanctioned parties without the required export authorizations,” it said. “Additionally, the Trump administration has been critical of existing trade agreements and may impose more stringent export controls. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities.”
The company specifically cites “U.S. export control regulations relating to China” as recent trade restrictions harm “our ability to participate in Chinese markets,” it said. “Sustained uncertainty about, or worsening of, current global economic conditions and further escalation of trade tensions between the U.S. and its trading partners, especially China, could result in a global economic slowdown and long-term changes to global trade, including retaliatory trade restrictions that further restrict our ability to operate in China.”
Some countries other than the U.S. also “regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries,” the company said. “Changes in our products or future changes in export and import regulations may create delays in the introduction of our platform in global markets, prevent our customers with global operations from deploying our platform globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. From time to time, various governmental agencies have proposed additional regulation of encryption technology.”