SEC Whistleblower Tip Provided by KMB Client Results in Enforcement Action

The Securities and Exchange Commission (“SEC”) announced a settlement on May 23, 2013, with Institutional Shareholder Services, Inc. (“ISS”), the nation’s largest shareholder advisory firm.  The settlement came after an SEC investigation determined that an ISS employee had supplied a proxy solicitor with material, non-public information about the votes that more than 100 institutional shareholder clients had cast in proxy contests leading up to shareholder meetings.  The SEC was able to discover this information in large part due to a tip provided by an SEC whistleblower represented by Katz, Marshall & Banks partner David J. Marshall and counsel Daniel B. Edelman.  The whistleblower’s tip led to the SEC recovering a penalty of $300,000 from ISS, as well as a guarantee by the company that it would hire a compliance consultant to improve internal controls.

Mr. Marshall said that his client’s actions are typical of whistleblowers who witness securities violations on the part of their employers or related companies. “The whistleblower saw an illegal scheme that harmed investors,” Marshall said. “He reported the scheme to his supervisors and then to the SEC, and that prompted the commission to bring charges.”