The Securities and Exchange Commission (SEC) has asked a federal court in Philadelphia to force Institutional Shareholder Services (ISS) — a firm it has regulated as an investment adviser since 1997 — to hand over the voting database at the centre of its business, and ISS is answering with the First Amendment. No securities-law violation is alleged; the whole fight is about whether a registrant can decide what its own regulator gets to see.

On September 4, 2026 the SEC filed an application for an order to show cause in SEC v. Institutional Shareholder Services, Inc., No. 2:26-mc-00078 (E.D. Pa.), publicised the same day as Litigation Release No. 26632. The application seeks enforcement of an investigative subpoena served on July 21, 2026 under Section 209(b) of the Investment Advisers Act of 1940. The Commission states that it “is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity violated the federal securities laws.” That sentence is what makes the matter unusual, and what makes the outcome relevant well beyond proxy advice.

Key facts

• Case: SEC v. Institutional Shareholder Services, Inc., No. 2:26-mc-00078-AMP (E.D. Pa.), filed September 4, 2026, docketed under the cause “Enforcement of Administrative Subpoena” (CourtListener docket 74754506).
• Trigger: a Division of Examinations review opened in March 2026 out of the SEC’s Philadelphia Regional Office, still open.
• Formal order: issued July 20, 2026 under Section 209(a), covering possible violations of Sections 204, 206(1), 206(2) and 206(4) of the Advisers Act and Rules 204-2 and 206(4)-8.
• What is demanded: client identification over a four-year period, vote authorisation registration agreements, and an electronic export of ProxyExchange recommendation and voting data. ISS agreed to the first two and refused the third.
• Registration: ISS has been SEC-registered as an investment adviser since 1997 and is a wholly owned subsidiary of Deutsche Börse AG. The Commission records prior examinations from March 2006, February 2012, July 2015 and July 2022, each of which identified deficiencies.
• Market share: the “more than 90 percent” figure for ISS and Glass Lewis combined comes from Executive Order 14366, 90 Fed. Reg. 58503 (December 11, 2025) — a presidential assertion, not an audited market study.
• Prior scoreboard: ISS defeated the SEC’s competing theory of authority in ISS v. SEC, 718 F. Supp. 3d 7 (D.D.C. 2024), affirmed at 142 F.4th 757 (D.C. Cir. July 1, 2025).

Methodology and sources

This analysis rests on primary documents: the SEC’s memorandum of law filed September 4, 2026 in the Eastern District of Pennsylvania, read in full; the docket; Litigation Release No. 26632; the D.C. Circuit’s July 1, 2025 opinion; Executive Order 14366 as published in the Federal Register; the Advisers Act text; Directive (EU) 2017/828; the UK Proxy Advisors (Shareholders’ Rights) Regulations 2019; and the Texas legislative record for S.B. 2337. Where ISS’s position appears, it is quoted from ISS’s own correspondence as reproduced in the SEC’s filing, or from ISS’s public materials. As of publication no responsive ISS statement on this application had appeared on the ISS STOXX press centre, so the company’s position is taken from documents rather than paraphrased. The window is March to September 2026 for the dispute and 2019 to 2026 for the backstory.

What Section 204(a) actually lets the SEC do

Section 204(a) of the Advisers Act is the quiet provision that carries most of the SEC’s routine supervisory weight. It requires registered advisers to make and keep records relating to their advisory business, and makes those records “subject at any time, or from time to time, to such reasonable periodic, special, or other examinations by representatives of the Commission as the Commission deems necessary or appropriate in the public interest or for the protection of investors” (15 U.S.C. § 80b-4(a); Rule 204-2, 17 C.F.R. § 275.204-2). The statutory definition of records is deliberately wide: “accounts, correspondence, memorandums, tapes, discs, papers, books, and other documents or transcribed information of any type, whether expressed in ordinary or machine language.”

Section 204(a) has no subpoena attached to it. When an examination stalls, the Commission escalates: Section 209(a) authorises an investigation and Section 209(b) authorises subpoenas for records “relevant or material” to it. That is the sequence recorded here. Examinations staff asked in March 2026; ISS produced three sample ProxyExchange reports on April 27, 2026; staff then asked for the same reports for all clients covering July 1, 2024 to February 28, 2026 and followed up at least nine times; Enforcement opened an inquiry on July 6, 2026; the Commission issued a formal order on July 20 and served the subpoena on July 21. A subpoena-enforcement action is not a fraud suit. It is a miscellaneous proceeding in which the court decides one narrow question — must the recipient comply — and nothing about whether the recipient did anything wrong.

The test is settled and undemanding. In the Third Circuit, courts “will enforce a subpoena if: (1) the subpoena is within the statutory authority of the agency; (2) the information sought is reasonably relevant to the inquiry; and (3) the demand is not unreasonably broad or burdensome” (United States v. Westinghouse Elec. Corp., 788 F.2d 164, 166 (3d Cir. 1986), applying United States v. Powell, 379 U.S. 48 (1964)). The burden then shifts to the recipient, and the Third Circuit calls that burden “almost insurmountable” (Pickel v. United States, 746 F.2d 176, 184-85 (3d Cir. 1984)). The one live escape hatch is improper purpose: SEC v. Wheeling-Pittsburgh Steel Corp., 648 F.2d 118, 124 (3d Cir. 1981) (en banc) holds that a subpoena issued for an improper purpose will not be enforced. That is the door ISS is trying to walk through.

How four jurisdictions supervise proxy advisers

Jurisdiction / regulator	Effective date	Scope	Key requirement	Penalty / sanction
US federal (SEC, Advisers Act)	ISS registered since 1997; Rule 204-2 in force	Proxy advisers meeting the Section 202(a)(11) adviser definition	Section 204(a) records and examination; Section 206 fiduciary duties; Section 209(b) subpoena power	Court-ordered compliance and contempt; separately Section 203 censure, bars and civil money penalties
EU (national competent authorities, SRD II)	Transposition deadline June 10, 2019	Proxy advisors advising on EU-regulated-market shares, including third-country firms operating through an EU establishment (Article 3j(4))	Article 3j: annual public disclosure of code of conduct, methodologies, information sources, per-market voting policies and conflicts	Article 14b: Member States must set measures and penalties that are “effective, proportionate and dissuasive”
UK (Financial Conduct Authority)	In force June 10, 2019 (SI 2019/926, made May 13, 2019)	Proxy advisors with a UK registered, head or establishment presence advising on UK/EEA-listed shares	Regulations 3-6: code of conduct disclosure, accuracy and reliability information, conflicts disclosure, annual updates	Regulation 11 public censure; Regulation 12 financial penalty, with criteria at Regulations 15-16
US state (Texas Attorney General, S.B. 2337)	Signed June 20, 2025; effective September 1, 2025; enjoined as to ISS August 29, 2025	Proxy advisory services touching Texas-connected companies	Conspicuous disclosure that advice is “not being provided solely in the financial interest of the company’s shareholders” where based on non-financial factors	Private right of action for declaratory and injunctive relief; deceptive trade practice under Business & Commerce Code § 17.47

Sources: 15 U.S.C. §§ 80b-4, 80b-6, 80b-9; Directive (EU) 2017/828, Articles 3j and 14b; The Proxy Advisors (Shareholders’ Rights) Regulations 2019; Texas S.B. 2337 (89th Legislature); docket in ISS v. Paxton, No. 1:25-cv-01160 (W.D. Tex.). Last updated: September 7, 2026.

The comparison exposes the structural oddity of the American position. Europe and Britain regulate proxy advisers directly, as proxy advisers, through named disclosure duties with a supervisor attached — the same directive that produced the shareholder-disclosure plumbing European banks now run under SRD II. The United States has no equivalent bespoke regime. It reaches ISS through the ordinary machinery of investment-adviser regulation, which is why the argument keeps collapsing into a definitional one: is proxy advice a solicitation, is it investment advice, or is it speech. The Texas row shows what a third layer does — a state statute aimed squarely at the content of the recommendation, blocked by a federal judge within days of its effective date. The arbitrage risk therefore runs in an unusual direction: not towards the loosest jurisdiction, but towards whichever forum offers the strongest constitutional defence.

“The question is not whether proxy advisers are influential — that point is undisputed — but whether the Congress chose to regulate influence or solicitation. Influence, even substantial influence, is distinct from solicitation.”

— Karen LeCraft Henderson, Circuit Judge, United States Court of Appeals for the District of Columbia Circuit, in ISS v. SEC, 142 F.4th 757 (opinion of July 1, 2025)

Why ISS is an SEC-registered adviser at all

The backstory is why this dispute has teeth. In September 2019 the Commission issued guidance stating that proxy voting advice constituted a “solicitation” under the proxy rules, and in July 2020 it codified that view in the Exemptions from the Proxy Rules for Proxy Voting Advice release (No. 34-89372, adopted July 22, 2020, effective November 2, 2020). Advice that recommended a vote, was sold for a fee and came from a firm marketing itself as a proxy-advice specialist became a solicitation, exempt only on three conditions: conflicts disclosure, issuer access to the advice, and a mechanism to relay the issuer’s response. In July 2022 the Commission reversed course in Proxy Voting Advice (No. 34-95266, adopted July 13, 2022, effective September 19, 2022), rescinding the second and third conditions. That reversal produced its own circuit split — the Fifth Circuit partly vacated the rescission in NAM v. SEC, 105 F.4th 802 (2024), while the Sixth Circuit upheld it in Chamber of Commerce v. SEC, 115 F.4th 740 (2024).

ISS had been litigating the underlying premise since October 2019. In February 2024 the District of Columbia district court granted it summary judgment, and on July 1, 2025 the D.C. Circuit affirmed, holding that “the best reading of section 14(a), grounded in the ordinary meaning of ‘solicit’ in its statutory context, is that the term refers to a request for proxy authority or a directed plea to exercise such authority in a particular manner. Proxy-voting advice rendered by a third party for a fee falls outside that definition. It is simply a recommendation.” The panel then listed the consequences that would not follow. Third on the list: “the SEC is separately empowered to regulate the provision of proxy-voting advice through the Investment Advisers Act, 15 U.S.C. §§ 80b-1 et seq., which imposes fiduciary duties on most proxy advisory firms” — a point the court attributed to ISS’s own appellate brief. Fourteen months later the Commission is standing in exactly that doorway.

The pattern repeats in ISS’s state litigation. ISS has sued attorneys general in Texas, Kansas, Indiana, Kentucky and Oklahoma, and on August 29, 2025 Judge Alan D. Albright enjoined enforcement of S.B. 2337 against it. In its Texas complaint ISS described itself as subject to “a comprehensive regulatory regime under the Advisers Act,” including “maintaining a comprehensive set of books and records” and submitting “to the SEC’s periodic examination.” The SEC quotes that back and argues ISS “cannot use the existence of SEC oversight and examination as a sword in state cases, then seek to evade that oversight here when the oversight goes to the core of its business.”

The First Amendment defence, and why a subpoena is a harder target

ISS’s objections, set out in an August 24, 2026 letter from counsel and summarised in the SEC’s filing, run to three: confidentiality and competitive harm; First Amendment retaliation; and freedom of association. The retaliation theory ties the subpoena to Executive Order 14366, signed December 11, 2025, which names ISS and Glass Lewis, asserts they “control more than 90 percent of the proxy advisor market,” accuses them of advancing “radical politically-motivated agendas,” and directs the SEC Chairman to review proxy-adviser rules, assess registration requirements, consider transparency mandates and “enforce the Federal securities laws’ anti-fraud provisions” against proxy advisers. ISS told the Commission it was “concern[ed] that the Subpoena, and Request 3 in particular, poses an unlawful effort to subject ISS to retaliatory actions for having engaged in protected speech.”

Clients “share their confidential voting strategies, priorities, and voting decisions with ISS with an expectation of confidentiality, just as American voters cast their ballots in the privacy of voting booths.”

— Douglas A. Fellman, counsel to ISS, in an August 24, 2026 letter to the SEC, as reproduced in the Commission’s memorandum of law

A First Amendment argument is materially weaker against a subpoena than against a disclosure rule, and the reason is structural. The 2019 and 2020 rules compelled ISS to say things — to route its research to issuers and relay their replies — and compelled speech is the strongest ground in the doctrine. A subpoena compels nothing to be published; it moves existing business records to a regulator that holds them under the Privacy Act, Freedom of Information Act Exemption 4 for confidential commercial information, and the confidential-treatment procedure at 17 C.F.R. § 200.83, which ISS has already invoked. Retaliation doctrine also requires more than a temporal link to protected speech: the SEC’s position is that ISS “must show that it would be improper for the SEC to investigate it in light of that speech,” and that no case recognises a First Amendment retaliation defence to the examination of a registrant. On association the Commission dismisses ISS’s reliance on First Choice Women’s Resource Centers, Inc. v. Davenport, 146 S. Ct. 1114 (2026) by drawing the obvious line: a paid, registered fiduciary is not a donor-funded advocacy group. None of this makes the defence frivolous — the improper-purpose exception is real, and an executive order naming the target is unusual evidence — but it is an uphill fight.

What this means for asset managers and compliance teams

For asset managers who outsource voting, the exposure is evidentiary rather than reputational. If the court orders full production, the SEC will hold client-identified records of how each ISS client’s shares were recommended and voted across roughly four years. Managers on ISS custom policies should assume their voting histories are reviewable and should be able to reconcile them against their own Rule 204-2 books, their Form N-PX filings, their client mandates and their proxy-voting policies under Rule 206(4)-6. The FY2026 Division of Examinations priorities already flag adviser adherence to fiduciary standards and, for advisers with activist engagement practices, the accuracy of Form N-PX and Schedule 13D/13G filings — although that document does not name proxy advisers at all. The absence matters: this examination is not the execution of a published priority. Managers who have lived through a contested vote, as Plus500 did when it faced a second shareholder rebellion over executive pay, will recognise how fast a voting record becomes evidence.

For compliance teams the case tests a proposition many registrants would prefer left untested — that confidentiality owed to a client is not a defence against the client’s own regulator. The SEC cites SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735, 743 (1984) for the rule that information shared in confidence with a third party can be passed onward to authorities, and SEC v. Barr Financial Group, No. 98-1806, 1999 WL 1209520 (M.D. Fla. May 5, 1999), where an adviser lost the same argument about releasing client information. Firms holding sensitive client data should treat “we will anonymise it” as a negotiating position with a short shelf life; the Commission’s answer is that anonymised data is “materially different information” that cannot test whether recommendations were differentiated among similarly situated clients. The direction of travel is consistent, from FinCEN’s move to extend anti-money-laundering programmes to investment advisers to the retreat that followed when the SEC dropped its climate-disclosure rule.

For the wider information industry the stakes are the ones nobody has litigated. Environmental, social and governance raters, index providers, credit-rating agencies and research houses all produce opinions that move capital, and all hold client-linked files. If ISS establishes that a research provider’s files enjoy some constitutional insulation from routine supervisory demand, the effect will not stop at proxy advice. If ISS loses, the consequential holding is the quiet one: that the content of an opinion sold for a fee by a fiduciary is examinable, in identified form, because the fiduciary duty attaches to the advice and not merely to the process around it.

What is next

The immediate step is procedural. The Commission asked for an order to show cause; the district court, with the matter assigned to Judge Antonio M. Pozos, will set a hearing and a briefing schedule, and ISS will turn its August 24 letter into a legal argument. Proceedings of this kind are built to move quickly, and the questions are the three Westinghouse factors plus improper purpose — not whether ISS breached any duty.

Three larger threads run in parallel. Executive Order 14366 directs the SEC Chairman to consider revising or rescinding proxy-adviser rules and Rule 14a-8 and to assess whether proxy advisers should be required to register as investment advisers; any resulting rulemaking carries its own Administrative Procedure Act cycle and its own litigation. ISS’s constitutional campaign against state statutes continues, with the Texas case in discovery under an amended scheduling order and parallel suits pending in Indiana, Kansas, Kentucky and Oklahoma. And the Federal Trade Commission and Department of Labor carry their own mandates under the order — antitrust review of proxy advisers, and a possible Employee Retirement Income Security Act fiduciary designation for firms advising on plan share rights. Any of those can reshape the ground before the Philadelphia docket produces an opinion.

Frequently asked questions

Is the SEC suing ISS for breaking securities law?

No. The September 4, 2026 filing is an application for an order to show cause and an order compelling compliance with an administrative subpoena — a miscellaneous proceeding, not an enforcement complaint. Litigation Release No. 26632 states that the Commission “is continuing its fact-finding investigation and, to date, has not concluded that any individual or entity violated the federal securities laws.” The July 20, 2026 formal order identifies the statutes under review, but identifying them is not charging them.

What is Section 204(a) of the Advisers Act?

Section 204(a), at 15 U.S.C. § 80b-4(a), requires SEC-registered investment advisers to make and keep records relating to their advisory business and makes those records subject “at any time” to reasonable examination by Commission representatives. Rule 204-2 specifies which records. Section 204(a) is the examination hook; the subpoena power sits separately in Section 209(b), which reaches records “relevant or material” to a Commission investigation.

Why is ISS regulated as an investment adviser rather than as a proxy solicitor?

Because the courts closed the other route. The SEC treated proxy voting advice as a “solicitation” under Section 14(a) of the Exchange Act from 2019, codifying that reading in the 2020 rule. ISS challenged it, won summary judgment in the District of Columbia in February 2024, and the D.C. Circuit affirmed on July 1, 2025, holding that advice given on request is a recommendation, not a solicitation. The same opinion noted that the Advisers Act remains available to the Commission — the authority now in play.

What exactly does the subpoena ask for?

Three categories: documents sufficient to identify ISS’s clients over a four-year period; vote authorisation registration agreements with modifications, renewals and terminations; and an electronic export of ProxyExchange recommendation and voting data using the same fields and formatting as three sample reports ISS produced on April 27, 2026. ISS agreed to the first two. The dispute is confined to the third, and specifically to whether client identities can be stripped out before production.

How does this compare with proxy-adviser rules in the EU and UK?

Both regulate proxy advisers directly. Article 3j of Directive (EU) 2017/828 requires annual public disclosure of a code of conduct, methodologies, information sources, per-market voting policies and conflicts, and expressly reaches non-EU firms operating through an EU establishment. The UK replicates those duties in Regulations 3 to 6 of SI 2019/926, supervised by the Financial Conduct Authority with censure and financial-penalty powers. The United States has no standalone equivalent, which is why the fight runs through adviser law.

What should an asset manager that uses ISS do now?

Assume the voting record is discoverable and make sure it reconciles: internal proxy-voting records under Rule 204-2 against what ISS holds, Form N-PX filings against both, the custom policy on file with ISS against the policy disclosed to clients, and documented oversight of the delegate under Rule 206(4)-6. Managers whose voting runs through third-party platforms — the infrastructure that now carries proxy voting to European retail investors — should confirm which entity holds the authoritative record.

Could ISS still win?

It can, but not on the ordinary grounds. Relevance and burden are weak where the registrant has already produced samples in the requested format and abandoned its burden objection. The realistic path is the improper-purpose exception recognised in SEC v. Wheeling-Pittsburgh Steel Corp., 648 F.2d 118 (3d Cir. 1981) (en banc) — an argument that an executive order naming ISS and characterising its recommendations as politically motivated makes this subpoena something other than routine supervision. That is a narrow door, and the objector’s burden is high.

This article is informational analysis only and does not constitute legal, regulatory, tax, or investment advice. Regulatory frameworks change frequently and interpretation depends on facts and circumstances; primary documents and official regulator guidance always supersede summaries. Firms should consult qualified legal counsel and their relevant supervisory authority before taking any action based on the analysis above.