SEC Whistleblower Tip Leads to Enforcement Action against Institutional Shareholder Services

On May 23, 2013, the SEC charged Institutional Shareholder Services (ISS) for failing to safeguard the confidential proxy voting information of clients participating in a number of significant proxy contests from approximately 2007 to 2012.  The SEC’s investigation, which is reported to have resulted from a whistleblower tip, found that an employee at ISS provided a proxy solicitor with material, nonpublic information revealing how more than 100 ISS institutional shareholder advisory clients were voting their proxy ballots. In exchange for voting information, the proxy solicitor provided the ISS employee with meals, expensive tickets to concerts and sporting events, and an airline ticket.

According to the SEC’s Order instituting settled administrative proceedings, ISS failed to establish or enforce written policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by ISS employees. Specifically, ISS lacked sufficient controls over employee access to databases of confidential client vote information.  ISS agreed to settle the charges by paying $300,000 and retaining an independent compliance consultant.  The whistleblower who provided information about the sale of proxy voting information to the SEC will reportedly not receive an award under the SEC Whistleblower Program because that program pays awards only when the whistleblower's information leads to an enforcement action resulting in more than $1 million in sanctions.

The investigation was conducted by the SEC’s Boston Regional Office.  Further information on this SEC enforcement action may be found in the SEC Press Release and Order. 

If you believe you have a tip under the SEC Whistleblower Program, contact attorney Ian McLoughlin at imcloughlin@shulaw.com, or call (617) 439-3939 or (800) 287-8119.  Alternately, click here to contact us through our website.