SEC Sues ISS as Trump Administration Ramps Up Scrutiny of Proxy Advisers

The Securities and Exchange Commission has sued Institutional Shareholder Services, the firm whose voting recommendations quietly shape outcomes at the vast majority of U.S. public companies. The lawsuit itself is narrower than the headlines suggest — it’s not (yet) an accusation of wrongdoing, but a fight to force ISS to hand over documents. Still, it lands squarely inside a much bigger fight the Trump administration has been building against the proxy advisory industry since December.

What the SEC Actually Filed

The SEC filed a subpoena-enforcement action against ISS on Friday, September 4, 2026, in the U.S. District Court for the Eastern District of Pennsylvania. The agency isn’t asking the court to punish ISS for violating securities law — it says explicitly that it hasn’t concluded any laws were broken. What it wants is a court order compelling ISS to comply with an administrative subpoena the firm has so far only partially answered.

The timeline behind that subpoena traces back to March 2026, when the SEC’s Division of Examinations opened a review of ISS’s operations, focused on whether its proxy voting recommendations and voting activity comply with federal securities law. ISS didn’t turn over everything the agency asked for. That gap led the SEC’s enforcement division to open a formal inquiry and issue a subpoena on July 21, seeking records tied to ISS’s recommendations and how it votes on clients’ behalf. Roughly six weeks after that subpoena went unanswered in full, the SEC went to court.

ISS is registered with the SEC as an investment adviser, which is part of what gives the agency jurisdiction to examine its practices in the first place.

Why ISS Is Pushing Back

ISS hasn’t simply stayed quiet. In correspondence with the SEC, the company argued the subpoena raises First Amendment concerns — proxy recommendations are, in one sense, ISS’s opinion and speech — and warned that turning over detailed records of its recommendations and its clients’ voting activity could expose both ISS and the institutional investors who use it to retaliation. That’s a notable argument in an environment where several of ISS’s clients — pension funds, asset managers, index funds — have themselves faced political pressure over how they vote on environmental, social, and governance matters.

ISS did not immediately respond to media requests for comment on the lawsuit itself.

The Executive Order Behind All of This

This lawsuit didn’t come out of nowhere. On December 11, 2025, President Trump signed Executive Order 14366, “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors,” directing the SEC, the FTC, and the Department of Labor to tighten oversight of the industry. The order named ISS and its chief rival, Glass Lewis, specifically, asserting the two firms together control more than 90% of the U.S. proxy-advisory market. It instructed the SEC to review and potentially rescind any existing rules or guidance touching on ESG and diversity-related proxy matters, to pursue antifraud enforcement against proxy advisers over their voting recommendations, and to consider new disclosure requirements for the industry.

The “foreign-owned” framing in the order’s title isn’t rhetorical flourish alone — ISS is roughly 80% owned by Deutsche Börse Group, the German exchange operator, following a 2020–2021 acquisition, though the company remains headquartered in Rockville, Maryland, and operates day-to-day as a U.S. business. Glass Lewis, by comparison, is owned by a consortium including the Ontario Teachers’ Pension Plan and Peloton Capital Management, both Canadian investors.

SEC Chairman Paul Atkins signaled the direction of travel even before the executive order landed, telling an interviewer in November 2025 that the agency intended to examine proxy advisers’ influence over corporate governance “within the next year.” SEC Commissioner Mark Uyeda has separately floated a more aggressive theory: that coordinated voting facilitated through proxy advisers — sometimes called “robo-voting” — could in some circumstances mean investors are effectively acting as a group under federal beneficial-ownership rules, potentially triggering disclosure obligations most institutional holders have never had to worry about.

This Fight Has Been Building for Years

Proxy advisers have been a target of Republican-aligned scrutiny well before this lawsuit. The SEC issued guidance in 2019 and adopted formal rule amendments in 2020 — during Trump’s first term — requiring proxy advisory firms to let companies review and respond to voting recommendations before they went out to investors. The SEC under the Biden administration rescinded significant parts of that framework in 2022, arguing it had slowed down and chilled independent proxy research. ISS itself sued the SEC over related guidance in 2019 and won a favorable ruling from the D.C. Circuit in July 2025, adding another layer of legal back-and-forth to an already tangled regulatory history.

State governments have joined in too. Florida’s attorney general opened an investigation into both ISS and Glass Lewis in March 2025, followed by a lawsuit against both firms in November 2025. Texas passed a law, SB 2337, requiring proxy advisers to disclose when their recommendations are based on non-financial factors like ESG or DEI considerations; ISS and Glass Lewis sued to block it, and a federal judge in the Western District of Texas issued a preliminary injunction in August 2025 pending a trial now expected in early 2026.

Facing that pressure from multiple directions, both firms have already started changing how they operate. Glass Lewis announced in October 2025 that it will stop publishing a single standardized “benchmark” voting policy in 2027, shifting instead to more customized, client-specific voting frameworks — and registered with the SEC as an investment adviser in November 2025, mirroring ISS’s structure. ISS, for its part, revised its 2026 benchmark policies to move several categories — diversity proposals, political contributions, human rights, and climate change — from a general “for” recommendation to a case-by-case evaluation.

What’s Actually at Stake

ISS’s recommendations influence voting outcomes at a large share of U.S. public companies, including mega-cap names where institutional ownership can decide close votes on executive pay, board elections, and shareholder proposals. A regulatory environment that constrains how ISS operates — or a court fight that damages its credibility — would shift real leverage back toward company management and away from the standardized, third-party research that institutional investors have relied on for decades to vote thousands of portfolio holdings efficiently. Advocates of the crackdown argue that’s exactly the point: reducing what the executive order calls the “outsized influence” of a couple of firms whose recommendations often function as a default vote for large swaths of the market. Critics — including ISS itself, through its First Amendment argument — see it as an attempt to suppress independent research that occasionally runs counter to what corporate management wants.

For now, this particular fight is only about paperwork. Whether ISS ultimately complies with the subpoena, and what the SEC finds once it does, will determine whether this stays a discovery dispute or becomes the opening chapter of a much bigger enforcement case.

If you’re trying to understand how SEC enforcement actions typically unfold from here — subpoena fights, formal investigations, and eventual charges or settlements — our broader guide to how class action and securities lawsuits work breaks down the mechanics investors and companies alike should expect at each stage.

Researched and written by Israr Ahmad, legal content researcher and founder of AllAboutLawyer.com. Facts verified against CNBC’s reporting on the SEC’s court filing, Executive Order 14366, and law firm client-alert coverage from Gibson Dunn, Latham & Watkins, Skadden, and Willkie tracking the underlying regulatory history. Last Updated: September 7, 2026.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Laws vary by state and individual circumstances differ. For advice about your specific situation, consult a qualified attorney.