SEC Files Court Action to Obtain ISS Client Voting Data

The U.S. Securities and Exchange Commission has petitioned a federal court to force Institutional Shareholder Services to hand over comprehensive client voting records as part of its inquiry into the proxy advisory firm’s operations, according to a Bloomberg report on Saturday.

The SEC stated that ISS has not fully satisfied an administrative subpoena tied to an investigation begun in March. The probe focuses on whether the firm adheres to securities laws, including its fiduciary duty to act in the best interests of clients when offering advice.

The agency is demanding four years of records, encompassing materials that identify ISS clients and detail their voting choices.

This probe comes after President Donald Trump issued an executive order in December instructing the SEC chairman to examine proxy advisory firms such as ISS and Glass Lewis regarding their guidance on environmental, social, and governance matters and policies related to diversity, equity, and inclusion.

The SEC maintains that reviewing whether proxy-voting recommendations are swayed by political or policy goals to the detriment of clients falls within its supervisory remit.

ISS says it continues to be willing to cooperate with the regulator, yet it has contested the breadth of the demand, citing First Amendment protections.

The company argues that clients share voting data on the understanding that it stays confidential, and it contends that complying with the request could subject ISS and its clients to potential retaliation for their protected speech and voting activities.

This legal clash represents another dimension of Washington's increased oversight of the proxy advisory sector, whose guidance can shape how institutional investors cast votes on corporate governance issues and shareholder initiatives.

ISS is under majority ownership of Deutsche Boerse (ETR:DB1Gn), which took a controlling interest in the firm in 2021. This court bid may amplify regulatory focus on proxy advisers as the administration advances modifications to how ESG and DEI factors are incorporated into investment analysis and corporate proxy voting.