Diversity and Climate Disclosures Rules for Nasdaq-listed and Other Public Companies End
In recent months, Nasdaq Stock Market LLC (“Nasdaq”) diversity rules and Securities and Exchange Commission (“SEC”) climate disclosures for public companies have been struck down. On December 11, 2024, the Court of Appeals for the Fifth Circuit struck down the proposed diversity disclosure rules by Nasdaq, and on March 27, 2025, the SEC voted to end its defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions.
Proposed Nasdaq Diversity Rules
On August 6, 2021, the SEC approved the proposal filed by Nasdaq on December 1, 2020, to adopt new listing rules related to board diversity and disclosure. The proposed rules generally required each Nasdaq-listed company, subject to certain exceptions, to have at least two diverse board members or explain why it does not. The new listing standards also required NASDAQ-listed public companies to provide disclosure of information on the voluntary self-identified gender, racial characteristics, and LGBTQ+ status of their board. The diversity rules were expected to become effective between December 31, 2023 and December 31, 2026.
On October 18, 2023, just before the rules were to go into effect for most Nasdaq-listed public companies, the Alliance for Fair Board Recruitment and the National Center for Public Policy Research sued the SEC, rather than Nasdaq, alleging that the board diversity rules violated constitutional rights of equal protection by discriminating against white men while stigmatizing members of certain demographics. A three-judge panel of the Fifth Circuit refused to entertain the lawsuit, holding that the SEC acted appropriately in approving Nasdaq’s board diversity rules. The panel opined that although Nasdaq is regulated by the SEC, Nasdaq is still a private limited liability company, not created by the government, and is not subject to constitutional scrutiny, and the board diversity rules in question cannot be attributed to government rule-making.
On February 20, 2024, the 5th Circuit U.S. Court of Appeals agreed to rehear the lawsuit, and on December 11, 2024, in a 9-8 decision, the Court of Appeals struck down Nasdaq’s proposed diversity disclosure rules for listed companies. In invalidating the rules, the court deemed that the SEC exceeded its authority in approving the rule. Nasdaq has stated that it will not appeal the court’s decision, and it appears unlikely that the SEC will pursue an appeal. Regardless, public companies may elect to voluntarily include information on the diversity of their boards in their annual meeting proxy statements.
Proposed SEC Climate Disclosure Rules
In a separate action, on March 27, 2025, the SEC voted to end its defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions. The rules, adopted by the SEC on March 6, 2024, create a detailed and extensive special disclosure regime about climate risks for issuing and SEC reporting companies.
States and private parties had challenged the rules. The litigation was consolidated in the Eighth Circuit (Iowa v. SEC, No. 24-1522 (8th Cir.)), and the Commission previously stayed the effectiveness of the rules pending completion of that litigation. Briefings in the cases were completed before the change in Administrations.
Following the SEC’s vote, SEC staff sent a letter to the court stating that it withdraws its defense of the rules and that SEC counsel are no longer authorized to advance the arguments in the brief the SEC had filed. The letter states that the SEC yields any oral argument time back to the court.
For more information about NYSE or Nasdaq listings or compliance matters or to speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].
Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
