Parent group MSCI says ISS implemented new policy to prevent further leaks of privileged information
The SEC has warned MSCI, the global provider of indices, analytics and governance tools, that it plans to recommend public administrative proceedings against the company for violating the Investment Advisers Act in a case related to a whistleblower complaint early this year, MSCI has announced.
According to the allegations, an employee of the governance solutions provider ISS, a unit of MSCI, ‘provided proxy voting information to proxy solicitors in return for cash and other gifts,’ MSCI states in a filing to the SEC.
Specifically, the employee was accused of giving ‘information regarding how certain clients voted their proxies to a proxy solicitor over a number of years’ in return for cash and other gifts.
The SEC warning comes in the form of a Wells Notice, which gives the company the opportunity to argue against holding administrative proceedings before they actually start.
MSCI says ISS has since addressed problems that made the misbehavior possible and that it hopes to persuade the SEC that administrative proceedings are not necessary.
‘We understand the basis of this action would be that while ISS did have in place policies and procedures restricting and safeguarding client voting information generally, it did not have policies and procedures specifically addressing communications with proxy solicitors,’ MSCI says in the filing.
‘Additionally, ISS’ systems allowed the employee to view voting information pertaining to any of ISS’ clients as opposed to solely those clients assigned to the employee as a client account manager.
‘Since learning of the actions of the terminated employee, ISS has thoroughly reviewed its policies and procedures relating to confidential client information and the receipt of gifts and entertainment.
As a result of this review, ISS has implemented a new policy specifically addressing communications and contacts with proxy solicitors, enhanced its internal systems to further restrict internal access to client voting information, and conducted further training regarding its gifts and entertainment policy.’
Vanguard Group, the largest mutual fund company in the US and a main client of MSCI, also announced it would drop the company as a benchmark provider for 22 of its large index funds in a cost-cutting measure. The announcement prompted MSCI shares to plunge by more than 30 per cent in New York trading.
In a separate announcement, MSCI says it is in ‘advanced discussions’ over the potential acquisition of London-based IPD, which offers research, benchmarking, reporting and other services, mainly focused on the real estate industry, from operations in more than 30 countries.
‘There can be no assurances any agreement will be reached or that a transaction will be completed,’ MSCI says in a press release. ‘We will have no further comment until an agreement is reached or the discussions are terminated.’
