We previously covered Texas’s proxy advisor disclosure statute (see Texas’s New Proxy Advisor Disclosure Law: Key Details for Shareholders and Companies Ahead of September 2025) and reported that a federal court enjoined enforcement of the Texas law before it took effect (see Federal Court Blocks Enforcement of Texas Proxy Advisor Disclosure Law). Indiana has now enacted a nearly identical statute, and ISS has filed a complaint for declaratory and injunctive relief challenging the law’s constitutionality.
Institutional Shareholder Services Inc. (“ISS”) has filed a complaint for declaratory and injunctive relief against Indiana Attorney General Todd Rokita, challenging newly enacted H.B. 1273. The law, which is scheduled to take effect July 1, 2026, subjects ISS to broad state-mandated disclosure requirements whenever ISS provides advice that goes against what company managers want their shareholders to do.ISS has requested a preliminary injunction before that date arrives. See Institutional Shareholder Services Inc. v. Rokita, No. 1:26-cv-717 (S.D. Ind. filed Apr. 13, 2026).
Here is what boards, investors and legal counsel need to know.
What Does H.B. 1273 Require?
H.B. 1273 is triggered whenever a proxy advisor recommends voting against company management on any proposal, including proposals involving companies and clients located entirely outside of Indiana.
The law applies to:
- any proxy advisor that makes a recommendation against entity management on an entity proposal or proxy proposal,
- any proxy advisor that makes a “default recommendation or policy” concerning votes against entity management and entities governed by the laws of Indiana as well as other states and countries.
New Disclosure Requirements
The specific obligations vary depending on whether the recommendation is “based on a written financial analysis,” which H.B. 1273 defines narrowly to require a document that analyzes the expected short and long-term financial benefits and costs of the proposal, predicts what vote is most likely to positively affect investor value and explains the methods, processes and geographic location of personnel used to reach the conclusion.
If the recommendation is not based on such an analysis, the proxy advisor must:
- provide a clear and conspicuous disclosure to clients stating that the recommendation was made without a written financial analysis, including that it did not analyze expected financial benefits and costs, did not predict what vote would most positively affect investor value and did not explain the methods and processes used,
- deliver that same disclosure to company management and
- prominently display a disclosure on the homepage of its website for the entire time it is providing proxy advisory services.
If the recommendation is based on such an analysis, the proxy advisor must:
- disclose to clients that a written financial analysis was used and make it available upon request and
- provide a copy of that written financial analysis directly to company management.
Enforcement and Legal Risk
Non-compliance is deemed a deceptive act under Indiana's consumer protection law, exposing proxy advisors to civil penalties of $5,000 per violation.
ISS’s Constitutional Challenge
ISS raises five constitutional challenges to the law:
- First Amendment — Viewpoint Discrimination and Compelled Speech: The law targets only anti-management recommendations, burdening a specific viewpoint while leaving pro-management speech entirely unregulated. It also compels ISS to make disclosures that ISS considers false and misleading, including statements that it failed to conduct financial analysis when ISS already accounts for client investment interests and provides detailed methodological disclosures.
- Due Process — Vagueness: Key definitions in the law, including “default recommendation or policy,” are vague, inviting arbitrary enforcement and chilling ISS’s protected speech.
- Dormant Commerce Clause: H.B. 1273 purports to regulate transactions between ISS and non-Indiana clients occurring wholly outside Indiana, imposing burdens on interstate and foreign commerce that outweigh any legitimate local interest.
- Due Process — Extraterritorial Regulation: Indiana lacks sufficient contacts to regulate ISS’s relationships with out-of-state clients, and applying the law to those transactions violates the Due Process Clause.
- Horizontal Separation of Powers: By directly regulating out-of-state transactions, H.B. 1273 violates the Constitution’s horizontal separation of powers among the states.
Conclusion
H.B. 1273 follows a pattern of state legislation imposing disclosure obligations on proxy advisory firms, and ISS’s complaint raises the same constitutional arguments that succeeded in challenges to nearly identical statutes in Missouri and Texas. With the effective date approaching and a preliminary injunction motion expected shortly, boards, institutional investors and legal counsel should monitor this litigation closely for developments that may shape the regulatory landscape for proxy advisory services nationwide.