A federal appeals court has agreed to reconsider a challenge by two conservative groups to Nasdaq’s board diversity rule concerning the disclosure of women and minority representation on listed company boards.
The 5th Circuit U.S. Court of Appeals, in an order issued Monday night for a rehearing, also annulled a previous decision from October that upheld the Nasdaq rule by a three-judge panel from the circuit, which covers Texas, Louisiana, and Mississippi.
The Nasdaq rule mandates companies to divulge information about the diversity of their boards of directors and either meet a minimum requirement of women and minorities on their boards or provide an explanation for non-compliance.
In its Monday order, the 5th Circuit stated it will review the challenge to the Securities and Exchange Commission’s (SEC) endorsement of the Nasdaq rule, with the full complement of judges on that court conducting the rehearing in what is termed an en banc proceeding.
The decision followed a majority vote by active circuit judges to revisit the case at the petitioners’ behest. En banc rehearings are seldom granted. The court has tentatively scheduled oral arguments in the case for the week of May 13.
Edward Blum, president of the Alliance for Fair Board Recruitment, one of the groups contesting the rule, expressed gratitude for the court’s decision, stating, “NASDAQ’s rule promotes racial discrimination and polarizing personal disclosures and it is to be hoped that this rule is struck down.”
Margaret Little, an attorney representing the National Center for Public Policy Research, the other petitioner, remarked, “We think the panel erroneously concluded that discrimination regarding race, gender, and sexuality somehow falls within the Exchange Act purview.”
“We are delighted that the Fifth Circuit will rehear the panel’s decision and keep the SEC in its lane to focus on investor protection,” Little added, noting that her client is a conservative think tank.
An SEC spokeswoman defended the commission’s stance, stating, “We believe the panel decision was correct and will continue to defend the Commission’s order before the full court.”
