Fifth Circuit Upholds Nasdaq Board Diversity Rule

Last week, the U.S. Court of Appeals for the Fifth Circuit upheld Nasdaq's board diversity rule, which the SEC first approved in August 2021 and was then challenged as unconstitutionally discriminatory and an improper restraint on free speech and enacted in violation of the Administrative Procedures Act (APA) and the Securities Exchange Act of 1934 (Exchange Act).

As the SECond Opinions blog previously reported, the rule requires Nasdaq-listed companies to disclose information about board diversity statistics and either include women and minority directors on their boards or disclose why they do not. Specifically, the rule – an exchange "listing standard" – requires a company to disclose board diversity statistics each year and either have or explain why it lacks at least one director who identifies as female and one director who is a member of an underrepresented racial or ethnic minority or LGBTQ+.