WASHINGTON, D.C. —   Stephen Hall, Legal Director and Securities Specialist, issued the following statement in connection with the decision from the entire Fifth Circuit nullifying the SEC’s approval of NASDAQ’s board diversity disclosure rule:

“This decision represents a terrible setback for transparency, which is the lifeblood of our securities markets.  A rapidly growing number of investors, including the largest investment managers in the world, are demanding information about the composition of corporate boards, and specifically their level of racial and gender diversity.  That information helps investors make decisions about which companies to support with their capital.  In the end, this type of rule promotes the vitality and strength of our securities markets, and that benefits millions of everyday Americans who rely on the markets to save for retirement and achieve their other financial goals.

“The decision is also wrong on the law.  Contrary to the Court’s claim, the rule is directly related to the core purposes of the securities laws, which include protecting investors and the public interest.  But the Fifth Circuit dismisses this finding based on a narrow and archaic notion that the securities laws are basically limited to preventing fraud and unfair competition.  And as to the so-called major questions doctrine, the Fifth Circuit’s own three-judge panel readily rejected that argument when it upheld the rule last October:  Disclosure rules, they said, including those related to diversity, are ‘business as usual for the SEC,’ and there is nothing extraordinary or ‘unheralded’ about such a rule.  Better Markets strongly supported the rule in its amicus brief.

“This decision sadly provides more evidence that the Fifth Circuit, especially taken as a whole, is intent on striking down agency rules, no matter how important to investors, markets, and the public interest.  Its attack on the administrative state is revealed once again, with special hostility to a rule that while providing key disclosures would also offer the ancillary benefit of promoting diversity in corporate America—something we sorely need.”