The Fifth Circuit has vacated the opinion we discussed in our Oct. 30, 2023, client alert Diversity in the Boardroom: Fifth Circuit Rejects Challenge to the SEC Nasdaq Board Diversity Rules; En Banc Petition Quickly Filed and has agreed to rehear the case before the full court.

The lawsuit, brought by petitioner groups Alliance for Fair Board Recruitment and National Center for Public Policy Research, challenges the Securities and Exchange Commission's (SEC) approval of board diversity disclosure rules issued by Nasdaq. The rules require a company listed on the Nasdaq to have, or to explain why it does not have, two members of its board of directors from female, LGBTQ+ or nonwhite groups. Petitioners argue that these disclosure rules are unconstitutional violations of equal protection and free speech, and that the SEC's approval of the rules violated the Securities Exchange Act of 1934 and the Administrative Procedure Act.

As set forth in our prior alert, on Oct. 18, 2023, the appellate panel rejected petitioners' arguments and found the SEC had acted within its authority to approve Nasdaq's framework. Petitioners quickly filed for a rehearing en banc, which the Fifth Circuit granted on Feb. 19. Oral argument before all active judges of the court is tentatively scheduled for May 13.

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