Blog: Petition Filed for Review of SEC Approval of Nasdaq Board of Directors Diversity Rule | Cooley LLP



It should hardly surprise anyone that the new diversity rule of the Nasdaq board of directors (see this post from PubCo) would be challenged in court. The rule was approved by the SEC on Friday August 6. On Monday. On August 9, the Alliance for Fair Board Recruitment filed a slim application under Section 25 (a) of the Exchange Act with the Fifth Circuit Court of Appeal – the Alliance is headquartered in Texas – for the review of the final SEC order approving the Nasdaq rule. The petition itself isn’t particularly revealing, but it should be noted that the petitioner is also the most recent complainant challenging California’s two board diversity laws.

that of the Alliance Press release stipulate that

“The Nasdaq rule will force many of our nation’s largest publicly traded companies to illegally discriminate on the basis of gender, race and sexual orientation in the selection of directors…. The Nasdaq tries to shame companies into complying by requiring that any company that does not meet these quotas “publicly explain why.”

“According to the Nasdaq and the SEC, this approach helps investors and will improve business performance. As AFFBR explained in a comment subject to the SEC, the Nasdaq rule of discrimination or explanation also goes beyond its role and the authority granted by federal securities law and also violates the fundamental guarantees of the Bill of Rights against coerced speech and discrimination. based on gender and race by stereotyping all people of the same skin color or gender as similar and interchangeable. In addition, the rule will not provide the benefits promised. As Harvard law professor Jesse Fried said Explain, numerous studies have shown “that stock market returns suffer when companies are pressured to hire new directors for diversity reasons.”

“It’s not just investors who will suffer if the Nasdaq’s signaling rule of virtue is allowed to come into effect. The AFFBR has members who, due to their race, gender, and sexual orientation, are forced to compete on an uneven playing field due to Nasdaq quota requirements.

Section 25 (a) of the Exchange Act allows a “person aggrieved by a final order” of the SEC to obtain a review of the order by the United States Court of Appeal for the circuit in which it has its principal place of business, by filing, within 60% days, a written request requesting that the order be modified or annulled in whole or in part. The SEC is then required to file the record upon which the order is based. The SEC’s findings of fact, “if supported by substantial evidence, are conclusive.” The “court has jurisdiction, which becomes exclusive as soon as the file is filed, to confirm or modify and execute or cancel the order in whole or in part”. However, either party can apply to the court for “leave to produce further evidence” and the court may decide to send the matter back to the SEC for further processing. The filing of a petition does not constitute a stay of the order or rule of the SEC; however, the SEC or, where the court obtains exclusive jurisdiction, the court, could issue a stay.

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