Shareholder adviser firm paying $300G fine
A prominent firm in the business of advising big shareholders on how to vote in elections for company directors is paying a $300,000 fine to settle federal civil charges of failing to protect clients' confidential voting information.
Institutional Shareholder Services agreed to the penalty in a settlement announced Thursday with the Securities and Exchange Commission. Its clients include large mutual funds and pension funds. The firm, based in Rockville, Md., didn't admit or deny the SEC's allegations.
The SEC said that over five years, a former ISS worker gave a vote-gathering firm hired by companies information showing how more than 100 ISS clients planned to vote on ballots for directors. In exchange for getting the information before elections, the SEC said the firm gave the employee about $11,500 in tickets to concerts and sporting events as well as meals and an airline ticket.
Some of the ISS clients didn't want their vote information revealed before the elections at shareholder meetings because they held large stakes in the companies and their vote could move the companies' stock price, the SEC said.
It said the breaches of confidential data occurred from 2007 to 2012 and involved ISS clients that participated in a number of significant proxy contests, battles for control of companies waged through votes for directors. The SEC didn't name the proxy contests involved.
ISS had inadequate controls over its employees' access to confidential clients' vote information and failed to enforce policies to prevent misuse of the data, the agency said.
Under terms of the settlement, ISS also agreed to hire an independent consultant to help ensure compliance with the securities laws. ISS was also censured, raising a possibility it could face stiffer sanctions if the alleged violation is repeated.
ISS is a subsidiary of MSCI Inc., a public company that provides financial analytical information. "From the beginning, ISS took swift action of its own and also fully cooperated with the SEC to investigate and promptly resolve this matter," ISS spokeswoman Cheryl Gustitus said in a statement. -- AP