The Securities and Exchange Commission sued Institutional Shareholder Services to force compliance with a subpoena, a move that escalates federal scrutiny of firms that shape how institutional investors vote. The agency asked a federal court to order ISS to turn over records it says the firm has withheld despite extended deadlines and efforts to resolve the dispute.
The SEC filed the subpoena-enforcement action on Friday in the U.S. District Court for the Eastern District of Pennsylvania. The agency says ISS would not fully comply with an administrative subpoena seeking information about the firm’s proxy recommendations and its voting activity.
The regulator’s Division of Examinations began reviewing ISS in March and requested data related to recommendations and votes. The enforcement division opened an inquiry after ISS did not produce all requested material, and issued a subpoena on July 21, the SEC said. The agency also said its investigation remains at a fact-finding stage and it has not concluded that ISS violated federal securities laws.
ISS argued in correspondence with the SEC that the subpoena raises First Amendment concerns and could expose the firm and its clients to retaliation over voting activity. The company is registered with the SEC as an investment adviser. ISS did not immediately respond to requests for comment.
The lawsuit lands amid a broader push by the Trump administration to tighten oversight of proxy advisers. An executive order signed in December directed the SEC to review rules and guidance covering those firms, enforce securities-law antifraud provisions and consider extra disclosure and regulatory requirements. The order named ISS and rival Glass Lewis, and the White House said the two together control more than 90% of the proxy-advisory market.
The SEC is asking the court to compel production of the outstanding records. A ruling for the agency would reinforce its ability to use judicial remedies to obtain information from influential advisers that shape shareholder votes, while a decision for ISS could buttress its constitutional and confidentiality claims.
