Nasdaq Board Diversity Rules Face Test Before Full Fifth Circuit

SEC-backed Nasdaq regulations intended to encourage racial and gender diversity on company boards will face their biggest hurdle to date, as the right-leaning Fifth Circuit reconsiders the rules’ legality.

The full US Court of Appeals for the Fifth Circuit is set to hear oral arguments Tuesday in a conservative challenge to the stock exchange’s rules, after a panel of three Democratic-appointed judges upheld them last year. The New Orleans-based court, where Republican-picked judges have the majority, agreed to review the decision at the challengers’ request.

The Nasdaq rules at issue require thousands of publicly listed companies to report on their ...