CASE
SUMMARY
The U.S. Securities and Exchange Commission (SEC) received pushback for approving Nasdaq’s Board Diversity Rules, which required all companies listed on the exchange to not only publicly disclose board diversity statistics but also explain failures to meet new diversity requirements. NCLA’s client, the National Center for Public Policy Research, which owns shares in many Nasdaq companies, argued that SEC has no power to regulate in this field because the rules have nothing to do with fraud or honest markets.
The Rules fell outside of SEC’s regulatory authority under the 1934 Securities and Exchange Act, which empowered SEC to regulate securities to ensure honest markets and enforce federal laws that punish fraud. These longstanding laws were being misinterpreted by SEC to allow the agency, working with Nasdaq, to impose a “meet quota, explain why, or get delisted” regime.
In December 2024, NCLA convinced the en banc U.S. Court of Appeals for the Fifth Circuit to vacate the Rules.