Higher Education Reform and Opportunity Act of 2019

This bill, H.R. 4098, directly amends the Securities Exchange Act of 1934 to prohibit proxy advisory firms from engaging in conflicted conduct. Specifically, it bans firms from providing proxy voting advice if they also offer consulting services to a registrant, modify recommendations based on subscription status, or provide stewardship services to shareholder proponents related to the advice. This eliminates the dual-service model that has been a significant revenue driver for these firms. The legislation is not merely procedural; it directly restricts core business activities. The money trail for proxy advisory firms involves fees from both institutional investors for voting advice and, historically, from corporations for consulting services related to governance and shareholder engagement. This bill cuts off the latter revenue stream entirely for firms that wish to continue providing voting advice. Companies like Institutional Shareholder Services (ISS), a subsidiary of MSCI ($MSCI), and Glass Lewis, a subsidiary of S&P Global ($SPGI), are directly impacted. These firms derive substantial revenue from their advisory services, and the prohibition on consulting services creates a significant headwind for their financial performance. Historically, similar regulatory pressures have impacted proxy advisory firms. In 2010, the SEC issued guidance on proxy advisory firms, leading to increased scrutiny. While not a direct legislative ban, this guidance prompted firms to review and adjust their conflict-of-interest policies. More recently, in 2020, the SEC adopted rule amendments to address concerns about the accuracy and transparency of proxy voting advice, which led to increased compliance costs for these firms. While these past actions did not directly ban consulting, they signaled a regulatory environment increasingly hostile to perceived conflicts. The market reaction to the 2020 SEC rule changes was muted for $MSCI and $SPGI as the impact was primarily on compliance rather than a direct revenue ban. This bill, however, is a direct revenue ban, which is a much more severe action. The specific winners are difficult to identify directly, as the bill primarily creates losers. Companies that rely on proxy advisory firms for consulting services may see a shift in how they obtain governance advice, potentially leading to new, independent consulting firms emerging, though this is speculative. The clear losers are the major proxy advisory firms: Institutional Shareholder Services (ISS), owned by MSCI ($MSCI), and Glass Lewis, owned by S&P Global ($SPGI). Their ability to cross-sell consulting services alongside voting advice is eliminated, directly impacting their top-line revenue and profitability. The bill was introduced in 2019, but the actual bill text provided shows a June 24, 2025 date, suggesting it is a reintroduction or a new version. The next step is committee consideration in the House Financial Services Committee. If it passes committee, it would then go to a full House vote.