Public Company Update: Fifth Circuit Vacated Nasdaq Board Diversity Rules

On December 11, 2024, the Court of Appeals for the Fifth Circuit issued a decision in Alliance for Fair Board Recruitment v. SEC vacating the SEC’s approval of Nasdaq’s board diversity rules. The rules required tabular disclosure of voluntary self-identified gender, racial characteristics and LGBTQ+ status of a Nasdaq-listed company’s board of directors and required companies to have two directors who would be considered “diverse” or otherwise explain why they did not. As a result of the decision, Nasdaq-listed companies are no longer required to comply with these rules but may choose to retain certain board diversity disclosures on a voluntary basis. In the meantime, the Fifth Circuit’s narrow interpretation of the SEC’s authority could have broader implications for SEC rulemaking.