Institutional Shareholder Services Inc., which helps largeinvestors make voting choices in corporate proxy contests, will pay$300,000 to resolve U.S. regulatory claims that an employeeexchanged confidential client voting information for meals andconcert tickets.

ISS failed to establish or enforce written policies orsafeguards as the employee misused information on more than 100clients from 2007 through 2012, the Securities and ExchangeCommission said today in an administrative order. The firm, basedin Rockville, Maryland, also lacked sufficient controls overemployee access to databases of confidential client-voteinformation, the SEC said.

“Proxy advisers must tailor their controls based on the risks oftheir particular business in order to protect the integrity of theproxy voting process,” Julie Riewe, deputy chief of the SECenforcement division's asset management unit, said in astatement.

The action is the second setback in a week for ISS, which helpedlead a failed push to split Jamie Dimon's dual roles as JPMorganChase & Co.'s chief executive officer and chairman.Shareholders of the biggest U.S. bank voted 32 percent in favor ofnaming an independent chairman, according to preliminary resultsreleased May 21, down from 40 percent a year earlier.

The firm, which settled the claims without admitting or denyingwrongdoing, agreed to hire an independent compliance consultant toreview its supervisory and compliance policies, the SEC said.

“From the beginning, ISS took swift action of its own and alsofully cooperated with the SEC to investigate and promptly resolvethis matter,” Cheryl Gustitus, an ISS spokeswoman, said in ane-mailed statement. “The confidentiality of our clients'information is essential and is of the highest priority to us.”

Some ISS clients didn't reveal vote information beforeshareholder meetings because, given the size of their positions,they could move the issuer's stock price, the SEC said. In atypical example, a proxy solicitor would e-mail the ISS employee alist of clients along with the name of an issuer and particularballot propositions, and ask “how many & how voted,” accordingto SEC the order. The ISS employee, who wasn't named in the order,replied by listing the number of shares voted by the shareholderand the choices, the SEC said.

In exchange, the ISS employee was given an airline ticket aswell as about $11,500 worth of tickets to sporting events andconcerts, the SEC said. The proxy solicitor also paid for about$20,000 in meals with the employee and his family, as well as mealswith other ISS employees.

The proxy solicitor also purchased sporting event tickets for atleast two other ISS account managers, one of whom informed thesolicitor that two large shareholders had withheld their votes in asignificant proxy contest, the SEC said.

ISS, a registered investment adviser, is a subsidiary of MSCIInc., a New York-based company that provides support tools toinvestment institutions.

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