Institutional Shareholder Services settles case with regulators

Institutional Shareholder Services Inc., a company that advises large investors on how to vote their stock proxies, settled charges with federal securities regulators over a failure to safeguard its clients’ confidential votes.

The Securities and Exchange Commission said ISS, of Rockville, Md., agreed to pay $300,000 and retain an independent compliance consultant after an employee provided information to an outside person about how more than 100 ISS clients voted their proxy ballots. Regulators said the information was delivered to a proxy solicitor, a person in the business of encouraging stockholders to vote on behalf of companies.

In exchange for the information, the proxy solicitor reimbursed the ISS employee for $20,000 in meals, $11,500 in tickets to concerts and sporting events, and an airline ticket.

Advertisement - Continue Reading Below

ISS neither admitted nor denied the charges, according to the SEC. Spokeswoman Cheryl Gustitus said in a statement, “From the beginning, ISS took swift action of its own and also fully cooperated with the SEC to investigate and promptly resolve this matter. The confidentiality of our clients’ information is essential and is of the highest priority to us at ISS. We now consider this matter closed.”

The employee no longer works at the company, the SEC said.

The Boston office of the SEC, which specializes in professional asset managers—the kind who might typically use ISS services—was involved in the investigation. The agency declined to name the Boston firms that might have been affected by the disclosure of the proxy votes.

The SEC said the breach was made possible because ISS “lacked sufficient controls” over employee access to confidential client vote information. The employee gathered the data by logging into the ISS voting website and using his personal e-mail account to communicate details to the proxy solicitor, the SEC said.