Nasdaq's diversity disclosure rules approved by SEC

August 13, 2021

US regulator the Securities and Exchange Commission (SEC) has given the green light to Nasdaq to introduce rules aimed at improving the diversity disclosures of listed companies.

Nasdaq first filed for such a rule in December 2020. The stock exchange wants to require its listed companies to publicly disclose consistent diversity statistics about their boards.

The rule would also require companies to have, or explain why they do not have, two diverse directors – one who self-identifies as female and another who self-identifies as either an underrepresented minority or LGBTQIA+. 

Gary Gensler, chair of the SEC, said in a statement that the rules would benefit investors’ understanding and help improve their decision-making processes on this important social issue. 

“These rules reflect calls from investors for greater transparency about the people who lead public companies, and a broad cross-section of commenters supported the proposed board diversity disclosure rule,” he said.

“Investors are looking for consistent and comparable data when making decisions about their investments. Our markets work best when investors have access to such information.” 

Nasdaq welcomed the SEC’s approval for a “market-led solution” that could “set a new standard for corporate governance”.

Despite the support from the SEC, members of the Republican party have opposed the idea. US Senate Banking Committee Ranking Member Pat Toomey described Nasdaq’s proposal as “prescriptive”.

US regulators have been making significant changes to their approaches and rulebooks since President Joe Biden moved into the White House in January. 

One of the most significant changes was the Department of Labor’s reversal of its fiduciary rule, brought in last year under the Trump administration, which was designed to limit pension investors’ ability to allocate to environmental and social strategies. The department reversed the rule after pressure from investors.