Court Overrules Nasdaq Board Diversity Rule

The court has come to the rescue once again!  On December 11, 2024, the 5th Circuit held that the SEC exceeded its authority in approving Nasdaq’s board diversity rule finding the rule was far removed from the purposes of the Securities Exchange Act’s regulatory regime.  Rumor has it that the Nasdaq does not intend to appeal, meaning the board diversity rule may be DOA.

Background

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal adding new listing Rule 5606(a) (see HERE).

Nasdaq Rule 5606(a) requires Nasdaq listed companies to publicly disclose, in an aggregated form, to the extent permitted by law (for example, some foreign countries may prohibit such disclosure), information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors as part of the ongoing corporate governance listing requirements.  Each company must provide an annual Board Diversity Matrix disclosure, including: (i) the total number of directors;

Termination Of Registration Under Section 12 Of The Exchange Act

A public company with a class of securities registered under Section 12 or which is subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) must file Section 13 reports with the SEC (10-K, 10-Q and 8-K).  A company registers securities under Section 12 by filing an Exchange Act registration statement such as on Form 10, Form 20-F or Form 8-A.  A company becomes subject to Section 15(d) by filing a registration statement under the Securities Act of 1933, as amended (“Securities Act”) such as a Form S-1 or F-1.  The Section 15(d) reporting requirements are scaled down from the full Exchange Act reporting requirements for a company with a class of securities registered under Section 12.

I have previously written about suspending the duty to file reports under Section 15(d) and the related question of determining voluntary reporting status (see HERE).  This blog addresses the termination of registration under Section 12.

Terminating