SEC Approves Nasdaq Rules to Promote Board Diversity

The SEC last week approved new Nasdaq rules for companies listing on the stock exchange that will require them to publicly disclose consistent transparent diversity statistics regarding their board of directors. Under the new rules, most Nasdaq-listed firms will be required to demonstrate—or explain why they do not have—at least two board members who represent Nasdaq-designated categories, including at least one individual who self-identifies as female and at least one who self-identifies either as a member of a racial or ethnic minority or as LGBTQ+.

The rules will take effect on a “two-stage deferred basis” and will provide transition periods for newly listed companies and listing transfers. Exceptions will also be provided for certain companies. Companies listed on the Nasdaq Global Select Market, Nasdaq Global Market and Nasdaq Capital Market would have slightly longer timeframes to comply.

Companies will begin annual disclosures of their board diversity data using a board diversity matrix by the later of one calendar year from Aug. 6, or the date the company files its proxy statement or its information statement for its annual shareholder meeting during the calendar year of the effective date. Companies also have the option to publish the information on their websites rather than providing the disclosure in the proxy statement.

The new rules could face legal challenges in the coming days. The American Bankers Association is monitoring developments and will provide updates to members as warranted.

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