The U.S. Securities and Exchange Commission (SEC) is suing ISS for forcing it to provide shareholder advice and voting data after the Trump administration tightened controls on proxy advisers that have influence over institutional investors.
September 7, 2569 – The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Institutional Shareholder Services (ISS), a firm that advises influential shareholders on their voting rights, to compel the company to provide information in response to a subpoena from the regulatory agency. This comes as the Trump administration continues to increase scrutiny of companies that play a role in helping investors decide how they will vote on their stocks.
The SEC filed a subpoena on Friday in the U.S. District Court for the Eastern District of Pennsylvania to enforce the subpoena, stating that the ISS has refused to fully comply with an administrative subpoena that requires information regarding ISS voting instructions and voting activity.
Inspection of the ISS began in March.
The SEC stated that its investigative division began examining the ISS in March and requested information relating to the company's voting instructions and voting data. After the ISS failed to provide all the requested information, the SEC's enforcement division opened an investigation and issued a subpoena on July 21.
The SEC stated that despite extensions to the deadline for data submission and multiple attempts to resolve the dispute, the ISS has still failed to submit some documents.
However, regulators emphasized that the investigation is still in the fact-gathering stage and has not yet concluded whether ISS violated U.S. federal securities laws.
The ISS cites concerns regarding freedom of expression.
The ISS argued in a letter to the SEC that the subpoena raised concerns about the First Amendment of the U.S. Constitution.
The company also stated that disclosing information in response to the subpoena could put the ISS and its customers at risk of retaliation for their voting activities.
The ISS has not yet immediately responded to CNBC's request for comment.
The case occurred amid the Trump administration's tightening of controls on proxy advisers.
This lawsuit comes amid broader efforts by the Trump administration to increase regulation of proxy advisers, or firms that advise shareholders on their voting rights.
These firms provide information, research, and advice to institutional investors to help them make informed voting decisions on various issues concerning listed companies, including board elections, executive compensation, and shareholder proposals.
Trump orders a review of the rules and monitors the ISS and Glass Lewis.
President Donald Trump signed an executive order in December directing the SEC to review rules and practices relating to shareholder rights advisory firms.
The order also directs the SEC to enforce anti-fraud provisions under securities laws, including considering additional disclosure and oversight requirements for these companies.
Trump's order names ISS and its competitor Glass Lewis, stating that the two companies together account for more than 90% of the shareholder rights advisory market.
The SEC is asking the court to order the ISS to hand over the information.
ISS is registered with the SEC as an investment adviser.
In this latest case, the SEC is asking the court to issue an order compelling the ISS to comply with outstanding subpoenas and provide the information the agency has requested.
However, the SEC's filing does not mean that ISS has been found guilty of wrongdoing, as the investigation is still in the fact-gathering stage, and the agency has not yet concluded that ISS violated U.S. federal securities laws.
Reference: cnbc.com
