The SEC Is Investigating the Company That Tells America's Investors How to Vote

The SEC wants to see who voted how. That sounds like ordinary regulatory paperwork — until you realize the company holding those voting records is the same company the SEC is currently investigating.

The Securities and Exchange Commission asked a federal court this week to force Institutional Shareholder Services, known as ISS, to hand over four years of client voting records. These documents would show exactly which institutional investors — the pension funds, asset managers, and endowments that sit on the other side of ISS's table — voted for or against corporate governance proposals, board directors, executive pay packages, and shareholder resolutions. ISS has not fully complied with the subpoena and is fighting the request on First Amendment grounds, arguing that handing over voting records would expose its clients to retaliation.

That is a genuinely odd position to hold. The company says: I can't show you how my clients voted, because they might get in trouble for what they chose. The implication is that ISS's clients are doing something with their votes that is either politically sensitive or legally exposed — or both.

It's a useful way in to the wider story, which is that the entire business model of the proxy advisory industry is coming apart from three directions at once: government investigation, client defection, and legal challenges that reach into the plumbing of how the business actually works.

How the machine works

ISS and its only real competitor, Glass Lewis, form a duopoly. Together they controlled roughly 97% of the proxy advisory market by 2024, up from about 90% in 2021. The business is simple in its outline: institutional investors, who hold shares in thousands of public companies, don't have the staff to research every shareholder proposal at every annual meeting. So they pay ISS or Glass Lewis to tell them how to vote. ISS charges about $220 million a year for this advice — advice that is, in practice, standardized across clients.

The company changed hands four times in a decade, sold to Deutsche Börse — the operator of the Frankfurt stock exchange — in 2020 for more than €1.9 billion. So when the SEC investigates ISS, the target is technically a German company that sits inside one of Europe's largest financial market infrastructure operators. That foreign-ownership detail is not accidental: it features prominently in the political framing that led to this investigation.

Here's the structural quirk that makes the industry worth examining: ISS sells voting recommendations to asset managers telling them how to vote on behalf of corporations. At the same time, ISS has a separate corporate advisory arm that sells governance consulting and data to those very corporations. The company maintains a policy that researchers don't know whether their recommendations will be shared with corporate or shareholder clients — a wall between the two sides. But the same firm is collecting fees from both the voters and the people being voted on. That is a conflict of interest that can be managed with procedures, sure, but it's a conflict of interest nonetheless.

What triggered this

The investigation traces back to December 2025, when President Trump signed an executive order titled, somewhat directly, "Protecting American Investors From Foreign-Owned and Politically Motivated Proxy Advisors." The order named ISS and Glass Lewis explicitly and directed the SEC, the FTC, and the Department of Labor to investigate whether these firms prioritize "radical politically-motivated agendas" — specifically on diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) issues — over financial returns for their clients.

The SEC was told to review its rules, enforce anti-fraud provisions about misstatements in voting recommendations, assess whether proxy advisors should register as registered investment advisers, and examine whether the firms serve as vehicles for asset managers to coordinate their votes — which would trigger disclosure requirements under securities law.

The SEC's demand for four years of voting records is the investigative plumbing that follows from that order. The question buried inside the subpoena is: did ISS's clients actually vote the way ISS told them to vote? And more pointedly, were those votes motivated by the financial interests of the pension funds and endowments that paid for the advice, or by something else?

The legal wall — and the hole in it

ISS has already won a major legal battle against the SEC. In July 2025, the D.C. Circuit Court ruled in ISS's favor, finding that the SEC exceeded its authority when it tried to classify proxy voting recommendations as "solicitations" under Section 14(a) of the Securities Exchange Act. The court's reasoning was textual: providing voting advice to a client at their request is not the same thing as soliciting a proxy vote. The adviser doesn't "solicit" the client — the client "solicits" the adviser.

That ruling limited the SEC's ability to regulate proxy advisors under the proxy rules. But it left the firms subject to the Investment Advisers Act of 1940 — which is exactly where the SEC is now operating from. ISS is registered as an investment adviser with the SEC. Investment advisers owe fiduciary duties to their clients. And the SEC can investigate whether those duties are being met.

So the court said the SEC can't regulate ISS under the proxy solicitation rules. The SEC's response, essentially: fine, we'll investigate you under the adviser rules instead. Different legal door, same building.

There's also a historical complication. Back in 2013, ISS paid a $300,000 fine to the SEC after an employee leaked confidential voting information for more than 100 institutional clients over a five-year period. The employee traded client voting plans for concert tickets, sports tickets, and airline tickets. The SEC found that ISS's internal controls were insufficient to prevent the misuse of confidential voting data.

Now the same company is arguing that its voting records are so sensitive that even the SEC shouldn't see them — while being investigated for whether those very records prove the company acted in its clients' financial best interests. The tension between the confidentiality claim and the fiduciary-duty investigation is real. One requires secrecy; the other requires transparency.

The bigger threat isn't the SEC

The government investigation is the headline. But the actual business threat to ISS is structural, and it's already happening.

In January 2026, JPMorgan Chase announced that its asset management arm — which oversees $4.5 trillion in assets — would stop using external proxy advisory firms entirely for U.S. company votes. Instead, JPMorgan built an in-house AI tool called Proxy IQ that analyzes data from over 3,000 annual meetings. JPMorgan CEO Jamie Dimon cited "undue influence" by external firms and said the bank would vote "solely in clients' best interests" using its own information advantage. Wells Fargo made a similar move around the same time.

When the two largest firms in a 97%-concentrated duopoly lose one of their biggest clients to an AI tool, you have to take that seriously. ISS generates roughly $220 million in revenue. The question is how much of that flows from clients who can afford to build their own voting infrastructure.

Glass Lewis, the rival, is also retreating from its own business model. Starting in 2027, Glass Lewis will phase out its standardized benchmark policy entirely and replace it with four custom perspectives — sustainability-focused, financially focused, governance fundamentals, and management-aligned. They voluntarily registered as an investment adviser with the SEC in response to regulatory pressure.

That move is itself revealing. The old business model was: we issue one set of standardized recommendations and everyone votes along. The new model is: we offer different recommendations to different clients, because the old model was the whole point of the investigation — everyone was voting the same way, following the same "agenda." But customization fragments the market, increases costs, and admits that there was never really one right answer to begin with.

What this means for the plumbing

The deeper consequence of all this is less about which firm wins or loses and more about what happens when the voting infrastructure of American public markets changes. ISS and Glass Lewis didn't just sell advice — they provided predictability. Corporations could forecast how institutional investors would vote on major issues because they knew which recommendations ISS and Glass Lewis would issue. Activists could plan campaigns around whether the proxy advisors would support or oppose their proposals. The entire ecosystem was calibrated around two firms' benchmark policies.

That predictability is evaporating. The 2026 proxy season already showed signs of it: activists are winning board seats through settlements rather than proxy fights, partly because vote outcomes have become less predictable. The "Big Three" index funds — BlackRock, Vanguard, and State Street — have split their stewardship teams into multiple independent voting units, each controlling less than 5% of any issuer's outstanding shares. They may vote in parallel today, but divergent policies can emerge tomorrow.

The machine that produced one predictable set of corporate governance outcomes is being dismantled. The SEC's voting records subpoena is just one gear in that dismantling.

Where the risk sits

For investors, the practical question isn't whether ISS is "good" or "bad" or "biased." It's whether the proxy advisory model — a small, foreign-owned duopoly that charges asset managers and corporations alike to standardize the voting behavior of American institutional investors — is structurally stable.

The evidence so far suggests it isn't. The government has a subpoena out. Clients with scale are building their own systems. The competing firm is abandoning its standardized product. The courts have ruled against the SEC on one legal theory, but the investigation continues under another. And there's a 2013 data breach that already proved the voting records are both valuable to outsiders and poorly protected inside.

None of this tells you what will happen to corporate governance or whether shareholders will vote better or worse after the duopoly frays. But it does tell you that a $220 million business built on being the default voting referee for the institutional investor class has become the subject of that class's own doubt.