Business

SEC warns ISS over ‘proxy rat’ tale

Institutional Shareholder Services, the nation’s largest and most influential shareholder adviser, is facing a lawsuit by the Securities and Exchange Commission after an ex-employee admitted selling confidential voting data to corporate boards.

In a regulatory filing yesterday, ISS’s parent company, MSCI, said ISS received a so-called Wells Notice from the SEC’s enforcement arm on Sept. 14, tied to the former employee’s illicit activities.

The SEC sends Wells Notices to warn companies that it is gearing up for a lawsuit and to offer them a chance to defend against the allegations.

Brian Zentmyer, a former back-office data manager at ISS’s Boston office, was fired in March after he admitted to giving shareholders’ confidential voting data to at least one proxy-solicitation firm in exchange for meals and gifts.

Such data can allow solicitors — who act as hired hands for corporate boards — to sway the outcome of corporate actions that require shareholder approval.

Zentmyer was outed in a whistleblower complaint to the SEC in February, as reported exclusively in The Post. The complaint was filed by Carl Clark, an employee of proxy-solicitation firm Georgeson — the alleged recipient of Zentmyer’s data.

Among the gifts Georgeson allegedly gave Zentmyer were plane tickets to the ISS worker’s wedding in Aruba.

Clark was fired in June along with Zentmyer’s alleged contact at Georgeson: Michael Sedlak.

Georgeson has not received a Wells Notice, a spokesman told The Post.

If the SEC proceeds with a lawsuit, it would target ISS’s policies and procedures for safeguarding client voting information, MSCI said.

Since firing Zentmyer, ISS has added policies and procedures to protect clients’ voting data, the company said.