On Friday, the regulator filed a court action to compel ISS to produce records that identify clients and include vote-level data. The agency said ISS has not fully complied with an administrative subpoena tied to the investigation, and it is seeking documents covering a period of four years.
Initiated in March, the SEC's examination focuses on whether ISS is following securities regulations and satisfying its fiduciary obligation to put clients' interests first when providing proxy-voting guidance. As the filing put it, "It is wholly appropriate for the SEC to look into whether ISS's investment advice to clients on proxy voting is driven by a particular political or policy aim to the detriment of its clients' interests." The SEC also wrote, "ISS's refusal to produce the required records to staff from the Division of Examinations, and now the Division of Enforcement, has impeded the Commission from advancing its mission and satisfying its statutory oversight and investor protection obligations." The inquiry traces back to a December executive order from President Donald Trump instructing the SEC chairman to restrict proxy advisers - among them ISS and Glass Lewis & Co. - from providing guidance on diversity, equity and inclusion policies, as well as environmental, social and governance matters.
In an email, an ISS spokesman said the firm intends to cooperate with the SEC and added that the agency's demand raises First Amendment concerns. "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 spokesman said. "Complying would expose ISS and its clients to potential retaliation for their protected speech and voting decisions on matters of public importance."
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Proxy advisers help shape how big shareholders vote on corporate issues. If the court forces more disclosure, or if the SEC changes how this market operates, it could shift how proposals on strategy, pay, and ESG get decided. For everyday investors who watch proxy outcomes to gauge a company's direction, pay attention to whether access to voting data tightens or broadens and how that might influence the policies companies adopt.
