US regulator sues ISS as it steps up scrutiny of proxy advisers - Financial Times

The U.S. Securities and Exchange Commission has filed a lawsuit against Institutional Shareholder Services (ISS) to enforce compliance with a subpoena. The legal action seeks to compel ISS to produce documents and testimony that the regulator says are essential to its ongoing investigations.

The move comes as the current administration intensifies its examination of proxy advisory firms, which play a pivotal role in advising shareholders on voting decisions at corporate meetings. Regulators have expressed concern that the influence of such advisers may not be sufficiently transparent or accountable.

According to the filing, the SEC alleges that ISS failed to fully respond to the subpoena, prompting the agency to seek judicial intervention. The commission argues that the information sought is necessary to assess whether proxy advisers are adhering to securities laws and to protect the integrity of the voting process.

The lawsuit underscores a broader regulatory effort to scrutinize the practices of proxy advisers, including their methodologies for rating corporate governance proposals and the potential conflicts of interest that may arise. The SEC has indicated that it will continue to monitor the sector and consider additional enforcement actions if warranted.

ISS, a leading provider of proxy voting advice and research, has not yet commented publicly on the filing. The outcome of the case could have implications for how proxy advisory firms operate and disclose their analyses to institutional investors.