The US Securities and Exchange Commission (SEC) has sued Institutional Shareholder Services (ISS) in federal court for allegedly refusing to provide documents demanded by a subpoena. This legal action, filed on September 4, 2026, in the US District Court for the Eastern District of Pennsylvania, is a major step in the SEC's increased scrutiny of proxy advisory firms. ISS, alongside Glass Lewis, dominates the proxy advisory market, influencing institutional shareholders on issues ranging from executive compensation to board elections.
The dispute originated in March 2026 when the SEC’s Division of Examinations initiated a review of ISS's operations to determine if its proxy recommendations and voting activities comply with federal securities laws. As a registered investment adviser, ISS falls under the SEC's regulatory authority. An administrative subpoena was formally issued on July 21, 2026, requesting critical operational data, including internal methodologies, communications about specific proxy recommendations, and compliance records. The SEC's filing states that ISS has "unreasonably refused" to produce these documents despite attempts to resolve the issue without litigation.
The SEC's lawsuit seeks a judicial order to compel ISS to comply with the subpoena. The agency has clarified that the underlying review has not yet concluded whether any violations have occurred. This is not the first time ISS has faced SEC scrutiny; the firm previously settled with the commission in 2013, paying a $300,000 penalty for improperly sharing confidential information and was mandated to retain a compliance consultant.
This enforcement action aligns with broader efforts by US regulators to increase oversight of proxy advisers. In 2025, former President Trump signed an executive order directing agencies, including the SEC, to review whether firms like ISS and Glass Lewis violated rules or antitrust laws, particularly regarding their influence on environmental and social issues. The Department of Justice also withdrew a 1987 Business Review Letter to ISS, citing changes in ISS's business model and concerns about market power concentration. These actions underscore growing regulatory concerns about the significant influence these firms wield in corporate governance.
