Rockville, Md.-based proxy adviser Institutional Shareholder Services Inc. agreed May 23 to pay $300,000 to resolve Securities and Exchange Commission charges that it failed to safeguard confidential information about clients participating “in a number of significant proxy contests” (In re Institutional Shareholder Services Inc., SEC, Admin. Proc. File No. 3-15331, 5/23/13).
In a release, the SEC said ISS also agreed without admitting or denying wrongdoing to engage an independent compliance consultant, and to cease and desist from future violations.
Proxy advisory firms are hired by institutional investors to advise them on, and sometime cast, their proxy votes. Corporate issuers have raised significant concerns about the firms, including the fact that two of them--ISS and Glass Lewis & Co. LLC--together control about 97 percent of the proxy advisory services market.
SEC Commissioner Daniel Gallagher recently called for a closer look at the current proxy advisory regime and the appropriate role that proxy advisers should play in today's corporate governance world.
Meanwhile, the commission said its investigation revealed that an ISS employee “provided a proxy solicitor with material, nonpublic information revealing how more than 100 ISS institutional shareholder advisory clients were voting their proxy ballots.” In return, the SEC alleged, the solicitor gave the ISS expensive concert tickets and other personal items.
“The breach was made possible in part because ISS lacked sufficient controls over employee access to confidential client vote information, as this employee gathered the data by logging into the ISS voting website from home or work and using his personal e-mail account to communicate details to the proxy solicitor,” the agency alleged. The employee, who was not identified in the SEC order, “no longer works at ISS.”
“Proxy advisers must tailor their controls based on the risks of their particular business in order to protect the integrity of the proxy voting process,” Julie M. Riewe, deputy chief of the Enforcement Division's Asset Management Unit, said in the release. “The internal controls at ISS did not adequately address the potential misuse of confidential proxy voting information by firm employees.”
The alleged misconduct occurred between 2007 and 2012.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)