SEC Charges ISS in Breach of Clients’ Confidential Proxy Voting Information

May 23, 2013

The SEC charged Rockville, Maryland based proxy adviser Institutional Shareholder Services (ISS) for failing to safeguard the confidential proxy voting information of clients participating in a number of significant proxy contests.  The SEC investigation found that an ISS employee provided a proxy solicitor with material non-public information revealing how more than 100 ISS institutional shareholder advisory clients were voting their proxy ballots. In exchange for the information, the proxy solicitor provided the ISS employee with meals, expensive tickets to concerts and sporting events, and an airline ticket.  This breach was possible in part because ISS lacked sufficient controls over employee access to confidential client vote information.  The employee obtained the data by logging into the ISS website from home or work and used his personal e-mail to communicate the details to the proxy solicitor. The employee is no longer employed by ISS. The SEC's order finds that ISS willfully violated Section 204A of the Investment Advisers Act of 1940.  ISS, a registered investment adviser, agreed to settle the charges by paying $300,000 and retaining an independent compliance consultant. 
Click here to access the press release and a link to the order.


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