SEC asks court to force ISS to provide client voting records

The U.S. Securities and Exchange Commission has requested a federal court order to obtain detailed client voting records from Institutional Shareholder Services (ISS) as part of an ongoing investigation, Bloomberg reported. The SEC claims ISS has not fully complied with an administrative subpoena issued in March, as the agency investigates whether the company is adhering to securities laws, including its fiduciary duty to act in clients' best interests.

The regulator is seeking four years' worth of records, including identifying information on ISS clients and data related to their voting decisions. This investigation stems from President Donald Trump's executive order in December that tasked the SEC chairman with reviewing proxy advisers like ISS and Glass Lewis, particularly in light of guidance regarding environmental, social, and governance issues, as well as diversity, equity, and inclusion policies.

The SEC maintains that examining potential influence of political or policy objectives on proxy-voting advice, at the expense of client interests, falls within its oversight duties. ISS maintains its commitment to cooperating with the regulator but has challenged the scope of the request on First Amendment grounds, arguing that revealing the requested records could expose the firm and its clients to potential retaliation over protected speech and voting decisions.

This dispute adds another dimension to Washington's scrutiny of the proxy advisory industry, whose recommendations can sway institutional investors' voting on corporate governance matters and shareholder proposals.