September 8, 2026
A subpoena fight could reshape how big index funds vote on pay and boards.
Every time BlackRock or State Street votes on a CEO’s pay package or a board seat at a company inside your S&P 500 fund, there is a good chance the recommendation behind that vote came from Institutional Shareholder Services. Now the SEC wants to see years of the data behind those recommendations, and ISS is refusing to hand it over.
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The Securities and Exchange Commission escalated its standoff with ISS by filing a subpoena enforcement action in the Eastern District of Pennsylvania on September 4, 2026. The agency’s Division of Examinations began reviewing ISS in March 2026 and requested data related to the firm’s proxy recommendations and votes. After ISS did not produce all of the requested information, the SEC’s Division of Enforcement opened an inquiry, and the Commission issued an administrative subpoena on July 21, 2026. According to the SEC’s filing, ISS has refused to fully produce the requested materials despite extended deadlines and repeated efforts to resolve the matter without litigation.
Why the Fight Matters to Fund Investors
ISS and its competitor Glass Lewis together control more than 90% of the proxy advisory market. The two firms provide institutional investors with research and recommendations on shareholder votes covering issues including board elections, executive compensation, and shareholder proposals. That concentration means a ruling or a forced operational change at ISS ripples immediately through the funds most ordinary investors hold.
ISS argued in correspondence with the SEC that the subpoena raised First Amendment concerns and could expose ISS and its clients to retaliation over their voting activity. ISS’s objections, set out in an August 24, 2026 letter from counsel, run to three: confidentiality and competitive harm; First Amendment retaliation; and freedom of association. The SEC’s counter is pointed: ISS is a regulated investment adviser, and the SEC argues it needs client-level and voting-related records to assess whether ISS is complying with federal securities laws and its fiduciary obligations.
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A Coordinated Push, Not an Isolated Case
The SEC subpoena fight is only one front in a coordinated push against ISS and Glass Lewis. In August 2026, the Justice Department announced it was withdrawing a 1987 business review letter that had addressed antitrust enforcement posture toward ISS, citing concerns about market concentration in the proxy advisory industry. In December 2025, President Donald Trump signed an executive order directing federal agencies, including the SEC, to review rules and guidance concerning proxy advisers and to increase oversight. The order specifically names ISS and Glass Lewis.
Ownership adds another layer. In 2020, Deutsche Börse announced it would acquire a majority stake of about 80% in ISS, valuing the business at about $2.275 billion (about €1.925 billion) for 100% of the company. The White House has singled out ISS and Glass Lewis as foreign-owned proxy advisers. That framing is not purely rhetorical; it has shaped the public case for stepped-up federal scrutiny.
What Changes for Index Fund Shareholders
The proxy voting world was already fragmenting before this lawsuit landed. BlackRock’s stewardship policies are developed and implemented separately by two teams: BlackRock Investment Stewardship for index equity strategies and BlackRock Active Investment Stewardship for active teams. State Street has an Asset Stewardship Team, and it also offers a separate Sustainability Stewardship Service for opt-in clients with a dedicated team and its own proxy voting and engagement policy.
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Sustained regulatory pressure could accelerate that trend. If ISS loses in court and its client-level voting data becomes part of a public record or a broader regulatory review, large fund managers may feel pressure to distance themselves from ISS recommendations on sensitive votes, particularly executive pay and contested board elections. That would give fund shareholders more visibility, but it would also make proxy outcomes less predictable across the market.
The Wealth Builder Takeaway
The SEC has explicitly stated the underlying review has not yet determined whether any violations actually occurred. This is still a data-gathering fight, not a verdict. But the direction is clear: the era in which two firms could quietly shape corporate governance across most of the U.S. equity market is ending. For long-term investors, the practical implication is worth watching. As ISS’s influence compresses, the votes your index fund casts on board composition and CEO pay will increasingly reflect the fund manager’s own judgment, not an outside recommendation. That makes knowing your fund manager’s stewardship philosophy a more important part of fund selection than it was five years ago.
