The Securities and Exchange Commission seeks to force Institutional Shareholder Services to comply with an administrative subpoena seeking reports on the proxy votes and recommendations for its clients, according to the SEC.
The order was filed Friday in U.S. District Court for the Eastern District of Pennsylvania and comes after the agency began an examination of the proxy advisory firm in March. The probe was started by the SEC’s Philadelphia regional office to determine whether the proxy advisory firm was complying with federal securities laws.
As part of that exam, the agency visited ISS, met with its personnel and requested information about the company’s clients and its proxy recommendations and votes, according to the agency’s memorandum of law.
“The SEC’s filing requests that the Court enter an order compelling ISS to comply with the administrative subpoena,” the agency said in a litigation release Friday. “The SEC is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity violated the federal securities laws.”
ISS — one of the two largest proxy advisory firms in the nation — said the agency could query its ProxyExchange service to create reports to see the information it requested but told the exams team that it did not keep a central repository of reports, advice and votes for its clients, according to the court filing. To compromise, ISS created three sample reports for its clients, which the SEC reviewed.
In May, following a review of those sample reports, the SEC requested similar reports on all of the firm’s clients from July 1, 2024 to Feb. 28, 2026, according to Friday’s filing. ISS’ lawyers have maintained its willingness to comply with the documents requested in letters to the agency, including by sharing “every proxy voting research report it issued” during the exam period and allowing the agency access to its ProxyExchange platform for inspection, according to court documents.
“The proffered research reports identify all ISS vote recommendations during the Exam Period, as well as issuers, dates, specific proposals and even the corresponding management recommendations,” the proxy advisory firm’s lawyers wrote in a July 15 letter to the agency.
“ISS is confident that its offer to produce hundreds of thousands of existing research reports and to permit inspection of additional requested data satisfies its obligations in this Advisers Act compliance examination,” the July 15 letter added. “[The SEC’s] suggestion that it would be more convenient for the staff if ISS created new, voluminous ProxyExchange reports does not alter this conclusion.”
The agency’s enforcement division said it issued an investigative order to ISS on July 20 and followed with an investigative subpoena on July 21. ISS complied with parts of the subpoena which asked for documents “sufficient to identify ISS’s clients during a four-year period and vote authorization registration agreements and any modifications, renewals, or terminations of those agreements,” according to Friday’s filing.
However, the firm offered to anonymize data which would require retaining a third-party. Additionally, ISS told the SEC that the agency is requesting information that is “highly sensitive” and, given a December executive order that specifically named the firm, “poses an unlawful effort to subject ISS to retaliatory actions for having engaged in protected speech,” according to the SEC’s court filing.
An ISS spokesperson told ESG Dive Tuesday that the agency’s demand “raises serious First Amendment concerns.”
“Complying would expose ISS and its clients to potential retaliation for their protected speech and voting decisions on matters of public importance,” an ISS spokesperson said in emailed comments. “Our clients share this information with an expectation that the information will not be shared — an expectation we take seriously and will continue to defend.”
The SEC is asking the court to enter a show cause order that requires ISS compliance with its subpoenas and provide the requested information, according to the filing.
