MSCI has begun an internal investigation into allegations that an employee of its Institutional Shareholder Services subsidiary sold confidential client proxy-voting data to proxy solicitation firms in exchange for cash and other gifts, according to a statement from Henry A. Fernandez, MSCI chairman, president and CEO.
On Feb. 10, “a New York Post reporter contacted ISS … stating that a whistleblower had made a complaint to the Securities & Exchange Commission,” Mr. Fernandez said in the statement, filed with the SEC on Monday.
“Although we have not been contacted by the SEC or seen a complaint, ISS is treating this matter extremely seriously,” Mr. Fernandez said in the statement. “The confidentiality of client information is essential to our business, and is emphasized in the ISS Regulatory Code of Ethics and the training of our employees. We launched an internal investigation into the matter and have placed the employee identified by the reporter on administrative leave while we further investigate the allegations.”
Cheryl Gustitus, ISS senior vice president of marketing and communications, wrote in an e-mail, “ISS has conveyed the information contained in the (SEC) filing to its clients. Nothing more was communicated as we are investigating the matter and have no other facts to offer.”
Ms. Gustitus would not identify the employee, nor did the SEC filing. The Post reported Sunday that the person was a midlevel employee at ISS' Boston office.
MSCI's investigation is being led by the company's legal counsel, with outside counsel support, Ms. Gustitus said.
“We are at an early stage of our internal investigation and therefore are not in a position to determine the validity of the allegations,” Ms. Gustitus wrote in the e-mail. “Depending upon the outcome of our investigation, we will take appropriate action, if necessary.”
Florence Harmon, SEC spokeswoman, said SEC officials declined to comment.
Officials at the California Public Employees' Retirement System, Sacramento, had no comment, said Wayne Davis, spokesman for the $229.6 billion fund. CalPERS is an ISS client; the retirement system buys research from ISS but doesn't use ISS' proxy-voting service.
Charles M. Elson, the Edgar S. Woolard Jr. chair in corporate governance and the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said, “It shows you how valuable the data is.”
“It is the first time I've been aware this having happened. The question is, what will (MSCI/ISS) do to make sure these things don't happen again. … It is a question of how they respond to it,” Mr. Elson said.
