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The U.S. Securities and Exchange Commission (SEC) has asked a federal court to force Institutional Shareholder Services (ISS) to provide detailed client voting records as part of an investigation into the proxy advisory firm's business practices.
According to Bloomberg, the SEC said ISS has not fully complied with an administrative subpoena connected to an investigation launched in March. Regulators are examining whether the company follows federal securities laws, including its fiduciary duty to provide recommendations that serve clients' best interests.
The SEC is seeking four years of records from ISS, including documents identifying clients and information detailing how those investors voted on corporate matters.
The investigation comes after President Donald Trump issued an executive order in December directing the SEC chairman to increase scrutiny of proxy advisory firms, including ISS and Glass Lewis. The order focused particularly on recommendations involving environmental, social and governance (ESG) issues and diversity, equity and inclusion (DEI) policies.
According to the regulator, determining whether proxy-voting recommendations are shaped by political or policy objectives rather than clients' financial interests falls within the SEC's oversight authority.
ISS said it remains willing to cooperate with the investigation but has challenged the breadth of the SEC's demand on First Amendment grounds. The proxy adviser argued that clients submit voting information with an expectation of confidentiality.
The company also warned that providing detailed voting records could expose both ISS and its customers to possible retaliation related to protected speech and investment voting decisions.
The legal dispute intensifies Washington's scrutiny of the proxy advisory industry. Firms such as ISS can wield significant influence over institutional investors' decisions on executive compensation, board elections, corporate governance and shareholder proposals.
ISS is majority-owned by Deutsche Boerse, which acquired its controlling stake in 2021. The SEC court action could further increase regulatory pressure on proxy advisers as the Trump administration seeks changes to how ESG and DEI considerations influence investment decisions and corporate shareholder voting.
