The Securities and Exchange Commission (SEC) has filed a lawsuit against Institutional Shareholder Services (ISS) in the U.S. District Court for the Eastern District of Pennsylvania, seeking to compel the proxy adviser to comply with an administrative subpoena. The SEC alleges that ISS has not produced all requested materials related to its proxy recommendations and voting activity, despite extended deadlines and repeated efforts to resolve the dispute. The agency emphasized that its investigation is still in the fact-finding stage and that it has not concluded ISS violated federal securities laws [1].
The SEC's Division of Examinations began reviewing ISS in March, requesting data on the firm's recommendations and votes. After ISS did not provide all the requested information, the enforcement division opened an inquiry and issued a subpoena on July 21. ISS has continued to withhold some records, citing First Amendment concerns and the risk of retaliation against itself and its clients over their voting activity [1].
This legal action occurs within the context of a broader Trump administration initiative to increase oversight of proxy advisers. In December, President Donald Trump signed an executive order directing the SEC to review its rules and guidance on proxy advisers, enforce securities-law antifraud provisions, and consider additional disclosure and regulatory requirements. The order specifically named ISS and its rival Glass Lewis, which together control more than 90% of the proxy-advisory market. ISS is registered with the SEC as an investment adviser [1].
The SEC is asking the court to order ISS to comply with the outstanding subpoena, but has reiterated that no determination has been made regarding any violation of securities laws at this stage [1].
CONCLUSION
The SEC's lawsuit against ISS marks an escalation in regulatory scrutiny of proxy advisers under the Trump administration. While the investigation is ongoing and no wrongdoing has been determined, the case highlights growing regulatory pressure on firms that influence shareholder voting. Market participants should monitor developments as the court considers the SEC's request for ISS to comply with the subpoena.