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ARTICLE · 18 DECEMBER 2024

Fifth Circuit Vacates Nasdaq Board Diversity Rules

Bass, Berry & Sims PLC
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On December 11, the Court of Appeals for the Fifth Circuit vacated Nasdaq Listing Rule 5605(f) and Nasdaq Listing Rule 5606(a) (together with Nasdaq Listing Rule IM-5900-9, the Board Diversity Rules) by a 9-8 vote.

United StatesCorporate/Commercial Law
Sehrish Siddiqui
Sehrish Siddiqui

On December 11, the Court of Appeals for the Fifth Circuit vacated Nasdaq Listing Rule 5605(f) and Nasdaq Listing Rule 5606(a) (together with Nasdaq Listing Rule IM-5900-9, the Board Diversity Rules) by a 9-8 vote. In Alliance for Fair Board Recruitment v. SEC, the Fifth Circuit held that the Securities and Exchange Commission (SEC) acted outside of its authority when it approved Nasdaq's Board Diversity Rules in 2021.

Background on Nasdaq Board Diversity Rules

The Board Diversity Rules set a "recommended objective" for most Nasdaq-listed companies with more than five directors to include at least one woman on their board of directors, along with one person who is an underrepresented minority or who self-identifies as LGBTQ+ utilizing a phased-in approach. If companies did not fulfill the diversity guidelines within the timeframes specified, they were required to explain why they did not. Listed companies were also required to disclose annual diversity statistics

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