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Nasdaq Board-Diversity Plan Challenged in Court as ‘Unfair’ (1)

Aug. 18, 2021, 3:38 PM

An opponent of affirmative action is challenging the U.S. Securities and Exchange Commission’s approval of a rule to get more women and minorities on the boards of companies trading on Nasdaq Inc.

The Alliance for Fair Board Recruitment, which has taken legal action against California over its requirement for corporate board diversity, filed a petition for a review of the SEC decision to a federal appeals court last week. Under the rule approved earlier this month, the boards of Nasdaq-listed companies must have at least one self-identified female and at least one underrepresented minority or LGBTQ person -- or they must explain why they don’t.

“The race, sex and sexual identity board quotas required by Nasdaq are unfair and illegal,” Edward Blum, president of the alliance, said in a press release Wednesday. “This rule violates our nation’s civil rights laws and Constitution and should be struck down by the courts without delay.”

The court action is latest in a series of lawsuits Blum has brought challenging diversity measures. As president of a group opposing affirmative-action called Students for Fair Admissions, Blum has unsuccessfully asked courts to block race-conscious admissions practices at the University of Texas and block Harvard University from considering race in admissions.

A representative for Nasdaq and a spokesperson for the SEC declined to comment.

In its decision, the SEC said the rule wouldn’t impose “any burden on competition that is not necessary or appropriate.” At the time, the exchange said it was “pleased that the SEC has approved Nasdaq’s proposal to enhance board diversity disclosures and encourage the creation of more diverse boards through a market-led solution.”

The case is Alliance for Fair Board Recruitment v. Securities and Exchange Commission, 21-60626, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

(Updated with the SEC declining to comment, background.)

--With assistance from Ben Bain and Katherine Doherty.

To contact the reporters on this story:
Bre Bradham in New York at bbradham@bloomberg.net;
Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Tina Davis, Steve Stroth

© 2021 Bloomberg L.P. All rights reserved. Used with permission.

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