STANDING UP AGAINST DEI AND ESG: NCLA Asks en Banc Fifth Circuit to Vacate Legally Defective Nasdaq Board Diversity Rules.

he New Civil Liberties Alliance has filed an opening brief in National Center for Public Policy Research v. SEC urging the en banc U.S. Court of Appeals for the Fifth Circuit to set aside Nasdaq’s unconstitutional “Board Diversity Rules,” which SEC promulgated without statutory authority. These Rules impose gender, race and sexual orientation quotas on corporate board membership for Nasdaq-listed companies. Further, the Rules compel companies that fail to meet their board seat quotas to explain why or face involuntary delisting from the stock exchange. Under a related rule, SEC will furnish lists of quota-satisfying names to companies unable to meet such quotas on their own. A Fifth Circuit panel had upheld the Board Diversity Rules, but the en banc court granted NCLA’s request to rehear the case. The 1934 Securities and Exchange Act limits SEC’s regulatory role to ensuring fair and honest markets, investor protection, orderly and efficient markets, and facilitating capital formation. SEC cannot venture outside of those statutory guardrails as it did here.

Reminder/disclosure: I’m on the NCLA’s advisory board.