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MONTH-IN-BRIEF (Aug 2021)

Securities Regulation

SEC Approves Nasdaq’s Board Diversity Rule

By Alan J. Wilson, WilmerHale

On August 6, the Securities and Exchange Commission (“SEC”) approved Nasdaq listing rules related to board diversity.  The new Board Diversity Rule establishes diversity objectives for different classes of Nasdaq-listed companies and related disclosure requirements. 

Subject to some exceptions, the Board Diversity Rule establishes an objective for each Nasdaq-listed company to have two “Diverse” (as defined in the rule) Board members, including one who self-identifies as female and one who self-identifies as an underrepresented minority or LGBTQ+.  Foreign issuers and smaller reporting companies can satisfy the objective with two female directors or other combinations set forth in the Board Diversity Rule.  Companies with five or fewer directors can satisfy the objective with one “Diverse” director.  If a company does not meet its diversity objective, it must provide an explanation for not doing so. 

Each Nasdaq-listed company (subject to limited exceptions) is also required under the Board Diversity Rule to publicly disclose, in an aggregated form and on a standardized matrix template or a format substantially similar thereto, information on the voluntarily self-identified gender, racial and LGBTQ+ status of the company’s board of directors, to the extent permitted by applicable law.  Such information must be reported annually in the Nasdaq-listed company’s proxy or information statement (or, if the company does not file a proxy, in its Form 10-K or 20-F), or on its website. 

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