SEC Sues Proxy Adviser ISS to Force Compliance With Subpoena, No Misconduct Alleged

SEC Takes ISS to Court

The Securities and Exchange Commission filed a subpoena enforcement action against Institutional Shareholder Services on September 4, 2026, in the U.S. District Court for the Eastern District of Pennsylvania. The agency wants a judge to order ISS to turn over documents it has withheld since an examination started in March.

The SEC issued an administrative subpoena to ISS on July 21, 2026. According to the SEC's court filing, ISS has cooperated with some requests but refused others, including core operational records: proxy voting recommendations, internal methodologies, and compliance documentation.

The SEC has been explicit that this is not a fraud case. The agency says it has made no allegations of misconduct against ISS. This is, in the SEC's own framing, a factual examination into whether the firm — registered with the SEC as an investment adviser — is meeting its obligations under federal securities law.

Why ISS Is Fighting Back

ISS, based in Maryland and owned by Germany's Deutsche Börse Group, has raised two objections, according to reporting from Crypto Briefing and KuCoin. First, the firm argues its voting recommendations are protected speech under the First Amendment. Second, it says handing over detailed client voting data could expose both ISS and its institutional clients to retaliation from corporations unhappy with how specific votes were cast.

Proxy voting can decide who sits on a board, whether an executive pay package survives, or whether a merger closes. Institutional investors who vote against management do not always want that made public, and corporations have a track record of pushing back hard against shareholders who oppose them.

ISS has been down this road before. Back in 2013, the firm paid a $300,000 penalty to settle SEC charges that it failed to properly safeguard client proxy voting information. That history gives the current subpoena fight some weight. The SEC has a legitimate, well-documented interest in how ISS handles sensitive client data, separate from any political motive.

A Bigger Campaign Than One Subpoena

This lawsuit does not exist in isolation. On August 5, 2026, the Justice Department's Antitrust Division withdrew a 1987 business review letter that had effectively given ISS a decades-old green light, according to a client alert from Morrison Foerster. The Division said the letter no longer reflects ISS's business, since the firm now offers corporate consulting services the original letter never contemplated. The Division was careful to say this was not an enforcement action or a finding of wrongdoing, and it explicitly stated that proxy advising itself is not inherently problematic.

Still, the Division flagged that ISS and its main rival, Glass Lewis, together control more than 90% of the proxy advisory industry, which it said raises "significant competition concerns."

Fenwick's securities law update ties the withdrawal to a wider pattern: a December 2025 executive order directing federal agencies to review rules governing proxy advisors, and Department of Labor guidance from April 2026 warning that proxy advisory firms may be acting as fiduciaries under federal law. Fenwick describes the pattern as "a broader, coordinated effort across antitrust and regulatory agencies — driven in part by ideological concerns about the influence of proxy advisors on corporate governance and ESG-related voting."

Ann Lipton, a law professor at Tulane University, put it more bluntly in comments carried by Traders Union, describing an "all-of-government war on proxy advisors" playing out at both the state and federal level.

The Corporate Complaint Isn't Baseless

Corporate issuers have argued for years that ISS and Glass Lewis hold too much sway over shareholder votes while facing too little accountability, particularly when their recommendations touch executive pay or environmental and social governance targets. Matthew Sigel, cited by Blockonomi, pointed to Glass Lewis recommendations tied to gender-diversity targets for corporate boards as one flashpoint, and noted VanEck now requires its portfolio managers to explain any override of such recommendations. Two private firms effectively setting voting norms for trillions of dollars in institutional capital, with limited transparency into their methodology, is worth scrutinizing regardless of politics.

At the same time, ISS's First Amendment argument is not frivolous either. Forcing a private research firm to disclose its proprietary voting methodology to a federal regulator, under threat of contempt, raises real questions about where oversight ends and compelled disclosure of opinion begins. A separate 2025 federal appeals court ruling already vacated the SEC's prior proxy adviser rules, according to Traders Union, meaning this fight is happening in a legal environment where the rules themselves are unsettled.

Blockonomi's report cites Bloomberg's Eric Balchunas describing ISS as controlling "about half" of the proxy voting outsourcing market, while every other source in this story, including the DOJ's own withdrawal letter, puts ISS and Glass Lewis combined at more than 90%. Readers should treat the 90% figure, backed by the Antitrust Division itself, as the more authoritative number.

What Happens Next

The Eastern District of Pennsylvania will now have to rule on whether ISS must comply with the SEC subpoena. If the court sides with the SEC, it would set a precedent for how far federal regulators can reach into a proxy adviser's internal methodology. If it sides with ISS, the firm's First Amendment defense could become a template for Glass Lewis and other advisers facing similar pressure. Either way, next year's proxy season is shaping up as the real test of how much power Washington intends to claw back from an industry that, until recently, operated with almost no direct federal check on its recommendations.