Institutional Shareholder Services (ISS) has filed a lawsuit in the U.S. District Court for the Southern District of Indiana, challenging the state’s newly promulgated statute, H.B. 1273. The firm is seeking a preliminary injunction to prevent the law from taking effect on 1 July 2026, arguing that the legislation represents an unconstitutional exercise of state power.
The statute would require ISS to issue state-mandated warnings whenever it recommends that institutional clients vote against the preferences of company management. ISS contends that the law constitutes state-imposed viewpoint discrimination, targeting only speech that runs counter to management. Furthermore, the complaint alleges the law is unconstitutionally vague and violates the dormant Commerce Clause by attempting to regulate business activities conducted far beyond Indiana’s borders.
The legal challenge also takes aim at the law’s requirement for a “written financial analysis,” which would force proxy advisors to predict specific financial outcomes for qualitative shareholder votes. ISS argues this mischaracterises the nature of the proxy process and would compel the firm to make misleading statements about the rigour of its own recommendations.
Indiana’s H.B. 1273 closely mirrors model legislation introduced in approximately 12 other U.S. states. According to ISS, these measures threaten to distort the free market of information relied upon by sophisticated global investors.
The firm maintains that institutional investors do not require government intervention to protect them from the professional advice they have specifically contracted ISS to provide.
