SEC Subpoena Fight with ISS Signals Heightened Scrutiny for Corporate Governance

The Securities and Exchange Commission (SEC) has asked a federal court to compel Institutional Shareholder Services (ISS), the dominant proxy advisory firm, to surrender records showing how its institutional clients vote. Akerman lawyers wrote about the subpoena fight in an article on the firm’s website.

The litigation in question is the SEC’s Sept. 4, 2026 application to enforce an administrative subpoena against ISS in the US District Court for the Eastern District of Pennsylvania.

ISS and its sole major competitor control more than 90% of the US proxy advisory market. Together they hold major influence over director elections, executive compensation plans, and shareholder proposals.

The SEC began examining ISS in March 2026 and requested ProxyExchange data—including client names, voting recommendations, and actual votes cast—for all clients from July 2024 through February 2026. ISS produced sample reports for three clients but refused a complete production, citing burden, confidentiality, and the First Amendment.

The SEC opened a formal investigation, served an investigative subpoena on July 21, 2026, and rejected ISS’s proposal to anonymize the data through an outside expert.

This case is unusual because the SEC has examined ISS four times before. ISS calls the subpoena retaliatory, linking it to President Trump’s December 2025 Executive Order 14366 urging tougher proxy adviser oversight.

The SEC contends that testing whether advice serves political aims over client interests is proper under fiduciary duty standards. Production could reveal whether recommendations differ among similar clients. Roughly 90% of shares ISS processes globally follow customized client policies, so a negative benchmark recommendation may not predict how an investor will vote.

Boards should read this SEC action as an enforcement trends signal and revisit board governance concerning proxy adviser relationships. Fiduciary duties are central, as the SEC treats politically driven advice as a potential breach.

Public companies should check disclosure obligations on proposals drawing negative recommendations. Engaging major holders directly addresses shareholder activism risk better than relying on benchmark reports.