44424 Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 90574 

(December 4, 2020), 85 FR 80472 (SR–NASDAQ– 

2020–081). Comments received on the Board 

Diversity Proposal are available on the 

Commission’s website at: https://www.sec.gov/ 

comments/sr-nasdaq-2020-081/ 

srnasdaq2020081.htm. On January 19, 2021, 

pursuant to Section 19(b)(2) of the Act, 15 U.S.C. 

78s(b)(2), the Division of Trading and Markets 

(‘‘Division’’), for the Commission pursuant to 

delegated authority, designated a longer period 

within which to approve the proposed rule change, 

disapprove the proposed rule change, or institute 

proceedings to determine whether to disapprove the 

proposed rule change. See Securities Exchange Act 

Release No. 90951, 86 FR 7135 (January 26, 2021). 

The Division, for the Commission pursuant to 

delegated authority, designated March 11, 2021 as 

the date by which the Commission shall approve or 

disapprove, or institute proceedings to determine 

whether to disapprove, the proposed rule change. 

See also infra note 11 and accompanying text 

(providing additional procedural history for the 

Board Diversity Proposal). 

4The full text of Amendment No. 1 to the Board 

Diversity Proposal is available on the Commission’s 

website at: https://www.sec.gov/comments/srnasdaq-2020-081/srnasdaq2020081-8425992- 

229601.pdf. 

5 15 U.S.C. 78s(b)(1). 

6 17 CFR 240.19b–4. 

7See Securities Exchange Act Release No. 90571 

(December 4, 2020), 85 FR 79556 (SR–NASDAQ– 

2020–082). Comments received on the Board 

Recruiting Service Proposal are available on the 

Commission’s website at: https://www.sec.gov/ 

comments/sr-nasdaq-2020-082/ 

srnasdaq2020082.htm. On January 19, 2021, 

pursuant to Section 19(b)(2) of the Act, 15 U.S.C. 

78s(b)(2), the Division, for the Commission 

pursuant to delegated authority, designated a longer 

period within which to approve the proposed rule 

change, disapprove the proposed rule change, or 

institute proceedings to determine whether to 

disapprove the proposed rule change. See Securities 

Exchange Act Release No. 90952, 86 FR 7148 

(January 26, 2021). The Division, for the 

Commission pursuant to delegated authority, 

designated March 10, 2021 as the date by which the 

Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

disapprove, the proposed rule change. See also 

infra note 11 and accompanying text (providing 

additional procedural history for the Board 

Recruiting Service Proposal). 

8The full text of Amendment No. 1 to the Board 

Recruiting Service Proposal is available on the 

Commission’s website at: https://www.sec.gov/ 

comments/sr-nasdaq-2020-082/srnasdaq2020082- 

8425987-229599.pdf. 

9Amendment No. 1 to the Board Diversity 

Proposal and Amendment No. 1 to the Board 

Recruiting Service Proposal are collectively referred 

to as ‘‘Amendments No. 1.’’ 

10 15 U.S.C. 78s(b)(2)(B). 

11See Securities Exchange Act Release No. 91286, 

86 FR 14484 (March 16, 2021). On June 7, 2021, 

pursuant to Section 19(b)(2) of the Act, 15 U.S.C. 

78s(b)(2), the Division, for the Commission 

pursuant to delegated authority, designated a longer 

period within which to issue an order approving or 

disapproving the proposed rule changes, as 

modified by Amendments No. 1. See Securities 

Exchange Act Release Nos. 92118, 86 FR 31355 

(June 11, 2021) (SR–NASDAQ–2020–081); 92119, 

86 FR 31355 (June 11, 2021) (SR–NASDAQ–2020– 

082). The Division, for the Commission pursuant to 

delegated authority, designated August 8, 2021 as 

the date by which the Commission shall approve or 

disapprove the Board Diversity Proposal, and 

August 7, 2021 as the date by which the 

Commission shall approve or disapprove the Board 

Recruiting Service Proposal. 

12 15 U.S.C. 78s(b)(2)(C)(i). 

of the burden imposed by the collection 

of information; (c) ways to enhance the 

quality, utility, and clarity of the 

information collected; and (d) ways to 

minimize the burden of the collection of 

information on respondents, including 

through the use of automated collection 

techniques or other forms of information 

technology. Consideration will be given 

to comments and suggestions submitted 

in writing within 60 days of this 

publication. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. 

Please direct your written comment to 

David Bottom, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Cynthia 

Roscoe, 100 F Street NE, Washington, 

DC 20549 or send an email to: PRA_

Mailbox@sec.gov. 

Dated: August 6, 2021. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17156 Filed 8–11–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92590; File Nos. SR– 

NASDAQ–2020–081; SR–NASDAQ–2020– 

082] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Order 

Approving Proposed Rule Changes, as 

Modified by Amendments No. 1, To 

Adopt Listing Rules Related to Board 

Diversity and To Offer Certain Listed 

Companies Access to a 

Complimentary Board Recruiting 

Service 

August 6, 2021. 

I. Introduction and Overview 

A self-regulatory organization, or 

‘‘SRO,’’ may propose a change in its 

rules or propose a new rule by filing the 

proposal with the Securities and 

Exchange Commission (‘‘Commission’’) 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’).1 This order considers two 

separate proposed rule changes that The 

Nasdaq Stock Market LLC (‘‘Nasdaq’’ or 

‘‘Exchange’’) filed with the Commission. 

On December 1, 2020, the Exchange 

filed with the Commission, pursuant to 

Section 19(b)(1) of the Act and Rule 

19b–4 thereunder,2 a proposed rule 

change to adopt listing rules related to 

board diversity (‘‘Board Diversity 

Proposal’’). The proposed rule change 

was published for comment in the 

Federal Register on December 11, 

2020.3 On February 26, 2021, the 

Exchange filed Amendment No. 1 to the 

proposed rule change, which replaced 

and superseded the proposed rule 

change as originally filed.4

On December 1, 2020, the Exchange 

also filed with the Commission, 

pursuant to Section 19(b)(1) of the Act 5

and Rule 19b–4 thereunder,6 a proposed 

rule change to offer certain listed 

companies access to a complimentary 

board recruiting service to help advance 

diversity on company boards (‘‘Board 

Recruiting Service Proposal’’), which 

was published for comment in the 

Federal Register on December 10, 

2020.7 On February 26, 2021, the 

Exchange filed Amendment No. 1 to the 

proposed rule change, which replaced 

and superseded the proposed rule 

change as originally filed.8

On March 10, 2021, the Division, for 

the Commission pursuant to delegated 

authority, published notice of 

Amendments No. 1 9 and instituted 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 10 to determine 

whether to approve or disapprove the 

proposed rule changes, as modified by 

Amendments No. 1.11

The Act governs the Commission’s 

review of SRO-proposed rules. Section 

19(b)(2)(C)(i) provides that the 

Commission ‘‘shall approve’’ a proposal 

if it finds that the rule is consistent with 

the requirements of the Act and the 

rules and regulations applicable to the 

SRO—including requirements in 

Section 6(b).12 The statute does not give 

the Commission the ability to make any 

changes to the rule proposal as 

submitted, or to disapprove the rule 

proposal on the ground that the 

Commission would prefer some 

alternative rule on the same topic. 

Under the Board Diversity Proposal, 

the Exchange proposes to require each 

Nasdaq-listed company, subject to 

certain exceptions, to publicly disclose 

in an aggregated form, to the extent 

permitted by applicable law, 

information on the voluntary selfidentified gender and racial 

characteristics and LGBTQ+ status (all 

terms defined below) of the company’s 

board of directors. The Exchange also 

proposes to require each Nasdaq-listed 

company, subject to certain exceptions, 

to have, or explain why it does not have, 

at least two members of its board of 

directors who are Diverse, including at 

least one director who self-identifies as 

female and at least one director who 


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13While these Nasdaq-listed companies would 

have an objective of at least two Diverse directors, 

including at least one director who self-identifies as 

female and at least one director who self-identifies 

as an Underrepresented Minority or LGBTQ+, as 

described below, other Nasdaq-listed companies 

would have different board diversity objectives. See 

infra notes 25–27. 

14 In approving these proposed rule changes, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). See also infra 

Section II. 

15 15 U.S.C. 78f(b)(5). 

16 15 U.S.C. 78f(b)(8). 

17 15 U.S.C. 78f(b)(4). 18Pursuant to proposed Rule 5605(f)(1), 

‘‘Diverse’’ would be defined to mean an individual 

who self-identifies in one or more of the following 

categories: (i) Female, (ii) Underrepresented 

Minority, or (iii) LGBTQ+. Also pursuant to 

proposed Rule 5605(f)(1), ‘‘Female’’ would be 

defined to mean an individual who self-identifies 

her gender as a woman, without regard to the 

individual’s designated sex at birth; 

‘‘Underrepresented Minority’’ would be defined to 

mean an individual who self-identifies as one or 

more of the following: Black or African American, 

Hispanic or Latinx, Asian, Native American or 

Alaska Native, Native Hawaiian or Pacific Islander, 

or Two or More Races or Ethnicities; and 

‘‘LGBTQ+’’ would be defined to mean an individual 

who self-identifies as any of the following: Lesbian, 

gay, bisexual, transgender, or as a member of the 

queer community. See Amendment No. 1 to the 

Board Diversity Proposal at 327; proposed Rule 

5605(f)(1). 

19See infra Section II.A.2. (describing the 

Exchange’s and commenters’ arguments regarding 

the demand for board diversity information, 

including board-level diversity statistics). 

20See Regulation S–K, Item 407(c)(2)(vi). 

21See infra Section II.A.2. (describing the 

Exchange’s and commenters’ arguments regarding 

the demand for board diversity information, 

including explanations for why a company does not 

meet the proposed diversity objectives). 

22See infra Section II.B. (describing commenters’ 

differing views regarding board diversity and 

whether board diversity affects company 

performance and governance). 

23See Securities Exchange Act Release No. 78223 

(July 1, 2016), 81 FR 44400, 44403 (July 7, 2016) 

(order approving SR–NASDAQ–2016–013) (‘‘2016 

Approval Order’’) (finding that exchange 

disclosure-related listing standards contribute to the 

maintenance of fair and orderly markets). The 

maintenance of ‘‘fair and orderly markets’’ is a 

statutory goal included throughout the Act, 

including components that apply to SROs such as 

Nasdaq. See, e.g., Sections 6(f), 9(i), 11, 11A, 12(f), 

and 19(b)(3) of the Act. 

24The Board Recruiting Service Proposal in 

general defines ‘‘Eligible Company’’ as a listed 

company that represents to the Exchange that it 

does not have: (i) At least one director who selfidentifies as Female; and (ii) at least one director 

who self-identifies as one or more of the following: 

An Underrepresented Minority or LGBTQ+. See 

proposed IM–5900–9(a); Amendment No. 1 to the 

Board Recruiting Service Proposal at 11 n.20 

(describing the treatment of a Company with a 

Smaller Board). A Foreign Issuer would be an 

Eligible Company if it represents to the Exchange 

that it does not have: (i) At least one director who 

Continued 

self-identifies as an Underrepresented 

Minority or LGBTQ+.13 Under the Board 

Recruiting Service Proposal, the 

Exchange proposes to provide certain 

Nasdaq-listed companies with one year 

of complimentary access for two users 

to a board recruiting service, which 

would provide access to a network of 

board-ready diverse candidates for 

companies to identify and evaluate. 

This order applies the governing 

standard under the Act and finds that 

the Board Diversity Proposal, as 

modified by Amendment No. 1, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange. Separately, it finds 

that the Board Recruiting Service 

Proposal, as modified by Amendment 

No. 1, is also consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange. The 

proposed rule changes therefore are 

required to be and are approved.14

In particular, the Commission finds 

that the Board Diversity Proposal and 

the Board Recruiting Service Proposal 

are consistent with Section 6(b)(5) of the 

Act,15 which requires that the rules of 

a national securities exchange be 

designed, among other things, to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest, not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers, 

and not be designed to regulate by 

virtue of any authority conferred by the 

Act matters not related to the purposes 

of the Act or the administration of the 

exchange; and Section 6(b)(8) of the 

Act,16 which requires that the rules of 

a national securities exchange not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Commission also finds that the 

Board Recruiting Service Proposal, as 

modified by Amendment No. 1, is 

consistent with Section 6(b)(4) of the 

Act,17 which requires that national 

securities exchange rules provide for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members and issuers and other persons 

using its facilities. The proposals and 

Commission findings are discussed 

below. 

II. Discussion and Commission 

Findings 

The Board Diversity Proposal would 

establish a disclosure-based framework 

that would make consistent and 

comparable statistics widely available to 

investors regarding the number of 

Diverse directors serving on a Nasdaqlisted company’s board.18 Board-level 

diversity statistics are currently not 

widely available on a consistent and 

comparable basis, even though the 

Exchange and many commenters argue 

that this type of information is 

important to investors.19 The Board 

Diversity Proposal would also provide 

increased transparency and require an 

explanation regarding why a Nasdaqlisted company does not meet the 

proposed board diversity objectives, for 

those companies that do not choose to 

meet such objectives. It would augment 

existing Commission requirements that 

companies disclose whether, and how, 

their boards or board nominating 

committees consider diversity in 

nominating new directors.20 As noted 

by the Exchange and a number of 

commenters,21 a better understanding of 

why a company does not meet the 

proposed objectives would contribute to 

investors’ investment and voting 

decisions. Investors and companies 

have different views regarding board 

diversity and whether board diversity 

affects company performance and 

governance.22 As discussed below, 

commenters representing a broad array 

of investors have indicated an interest 

in board diversity information. And, 

regardless of their views on those issues, 

the Board Diversity Proposal would 

provide investors with information to 

facilitate their evaluation of companies 

in which they might invest. The Board 

Diversity Proposal would therefore 

contribute to the maintenance of fair 

and orderly markets, which has 

previously been found by the 

Commission to support a finding that an 

exchange listing standard satisfied the 

requirements of Section 6(b)(5).23

Accordingly, as discussed below, the 

Commission finds that the Board 

Diversity Proposal is designed to 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. The Commission also 

finds that the Board Diversity Proposal 

is not designed to permit unfair 

discrimination between issuers or to 

regulate by virtue of any authority 

conferred by the Act matters not related 

to the purposes of the Act or the 

administration of the Exchange, and 

would not impose any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The Board Recruiting Service 

Proposal would provide Eligible 

Companies,24 which by definition do 


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self-identifies as Female; and (ii) at least one 

director who self-identifies as one or more of the 

following: Female, an Underrepresented Individual, 

or LGBTQ+. See proposed IM–5900–9(b). A Smaller 

Reporting Company would be an Eligible Company 

if it represents to the Exchange that it does not 

have: (i) At least one director who self-identifies as 

Female, and (ii) at least one director who selfidentifies as one or more of the following: Female, 

an Underrepresented Minority, or LGBTQ+. See 

proposed IM–5900–9(c). 

25Proposed Rule 5605(f)(2)(D) would require each 

company with a board of directors of five or fewer 

members (‘‘Company with a Smaller Board’’) to 

have, or explain why it does not have, at least one 

member of its board of directors who is Diverse. 26The Exchange proposes to define a Foreign 

Issuer as: (a) A Foreign Private Issuer (as defined 

in Rule 5005(a)(19)); or (b) a company that (i) is 

considered a ‘‘foreign issuer’’ under Rule 3b–4(b) 

under the Act, 17 CFR 240.3b–4(b), and (ii) has its 

principal executive offices located outside of the 

United States. See proposed Rule 5605(f)(1). For 

Foreign Issuers, the Exchange proposes to define 

‘‘Diverse’’ to mean an individual who self-identifies 

as one or more of the following: Female, LGBTQ+, 

or an underrepresented individual based on 

national, racial, ethnic, indigenous, cultural, 

religious, or linguistic identity in the country of the 

company’s principal executive offices as reported 

on the company’s Form F–1, 10–K, 20–F, or 40–F 

(‘‘Underrepresented Individual’’). See proposed 

Rule 5605(f)(2)(B)(i). Proposed Rule 5605(f)(2)(B) 

would require each Foreign Issuer (other than a 

Company with a Smaller Board) to have, or explain 

why it does not have, at least two members of its 

board of directors who are Diverse, including at 

least one Diverse director who self-identifies as 

Female. The second Diverse director may include 

an individual who self-identifies as one or more of 

the following: Female, LGBTQ+, or an 

Underrepresented Individual. 

27The Exchange proposes to define a Smaller 

Reporting Company as set forth in Rule 12b–2 

under the Act. See proposed Rule 5605(f)(1). 

Proposed Rule 5605(f)(2)(C) would require each 

Smaller Reporting Company (other than a Company 

with a Smaller Board, as discussed below) to have, 

or explain why it does not have, at least two 

members of its board of directors who are Diverse, 

including at least one Diverse director who selfidentifies as Female. The second Diverse director 

may include an individual who self-identifies as 

one or more of the following: Female, LGBTQ+, or 

an Underrepresented Minority. 

28As proposed, ‘‘two members of its board of 

directors who are Diverse’’ would exclude emeritus 

directors, retired directors, and members of an 

advisory board. See Amendment No. 1 to the Board 

Diversity Proposal at 73 n.187. 

29See proposed Rule 5605(f)(2)(A). 

30See proposed Rule 5605(f)(3). The disclosure 

must be provided in advance of the company’s next 

annual meeting of shareholders: (a) In any proxy 

statement or any information statement (or, if a 

company does not file a proxy, in its Form 10–K 

or 20–F); or (b) on the company’s website. See id. 

If the company provides the disclosure on its 

website, the company must submit such disclosure 

concurrently with the filing made pursuant to (a) 

above and submit a URL link to the disclosure 

through the Nasdaq Listing Center, within one 

business day after such posting. See id. 

31See Amendment No. 1 to the Board Diversity 

Proposal at 74–75 (emphasizing that an explanation 

must ‘‘satisfy subparagraphs (i) and (ii) of proposed 

Rule 5605(f)(3)’’—the company must ‘‘explain the 

reasons why it does not have the applicable number 

of Diverse directors,’’ it is not enough ‘‘merely to 

state that ‘the Company does not comply with 

Nasdaq’s diversity rule’’’). See also letter from John 

A. Zecca, Executive Vice President, Chief Legal 

Officer, and Chief Regulatory Officer, Nasdaq, to 

Vanessa A. Countryman, Secretary, Commission, 

dated February 26, 2021 (‘‘Nasdaq Response Letter 

II’’), at 8 (‘‘The company can choose to disclose as 

much, or as little, insight into the company’s 

circumstances or diversity philosophy as the 

company determines, and shareholders may request 

additional information directly from the company 

if they need additional information to make an 

informed voting or investment decision.’’). See id., 

for examples of specific disclosures the Exchange 

would consider sufficient to satisfy the 

requirements of proposed Rule 5605(f)(3). 

32See proposed Rule 5605(f)(6)(A). Proposed Rule 

5605(f)(6)(B) would provide a grace period for a 

company that has satisfied the diversity objectives 

within the applicable timeframes, but later ceases 

to meet the diversity objectives due to a vacancy on 

its board of directors. 

33See Rule 5810(c)(3). A company that receives 

a Staff Delisting Determination can appeal the 

determination to the Hearings Panel through the 

process set forth in Rule 5815. See Amendment No. 

1 to the Board Diversity Proposal at 88. 

34See Amendment No. 1 to the Board Diversity 

Proposal at 327 (defining ‘‘non-binary’’). Although 

non-binary is included as a category in the Board 

Diversity Matrix, a company would not satisfy the 

diversity objectives in proposed Rule 5605(f)(2) if 

a director self-identifies solely as non-binary. See 

id. at 66 n.173. 

35 If a director self-identifies in the ‘‘Two or More 

Races or Ethnicities’’ category, the director must 

also self-identify in each individual category, as 

appropriate. See id. at 66 n.174. 

not have a specified number of Diverse 

directors, with access to a network of 

board-ready diverse candidates, 

allowing these companies to identify 

and evaluate such candidates if they 

choose to use the service to increase 

diverse representation on their boards. 

The Board Recruiting Service Proposal 

would also help Eligible Companies to 

meet (or exceed, in the case of a 

Company with a Smaller Board 25) the 

diversity objectives under the separately 

approved Board Diversity Proposal, if 

they elect to meet those objectives rather 

than disclose why they have not met the 

objectives. Further, the Board Recruiting 

Service Proposal could help the 

Exchange compete to attract and retain 

listings, particularly in light of the 

diversity objectives in the Board 

Diversity Proposal, which is also 

approved by this order and that will 

apply to Nasdaq-listed companies. 

Accordingly, and as discussed below in 

Section II.I., the Commission finds that 

the Board Recruiting Service Proposal is 

designed to provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among issuers, is not 

designed to permit unfair 

discrimination between issuers, and 

does not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. The Commission 

further believes that the Board 

Recruiting Service Proposal would 

provide for the equitable allocation of 

complimentary services and reflects the 

current competitive environment for 

listings among national securities 

exchanges. 

A. Disclosures Under the Board 

Diversity Proposal 

1. Disclosure-Based Framework 

The Board Diversity Proposal’s 

disclosure-based framework would be 

established by proposed Rules 5605(f) 

and 5606. The Exchange proposes to 

adopt new Rule 5605(f)(2), which would 

require each Nasdaq-listed company 

(other than a Foreign Issuer,26 Smaller 

Reporting Company,27 or Company with 

a Smaller Board) to have, or explain 

why it does not have, at least two 

members of its board of directors who 

are Diverse,28 including at least one 

Diverse director who self-identifies as 

Female and at least one Diverse director 

who self-identifies as an 

Underrepresented Minority or 

LGBTQ+.29 If a company elects to satisfy 

the requirements of proposed Rule 

5605(f)(2) by disclosing why it does not 

meet the applicable diversity objectives, 

the company would be required to: (i) 

Specify the requirements of proposed 

Rule 5605(f)(2) that are applicable; and 

(ii) explain the reasons why it does not 

have two Diverse directors (or one 

Diverse director for a Company with a 

Smaller Board).30 The Exchange would 

not evaluate the substance or merits of 

a company’s explanation.31

As proposed, if a company fails to 

adhere to proposed Rule 5605(f), the 

Exchange’s Listing Qualifications 

Department would promptly notify the 

company and inform it that it has until 

the later of its next annual shareholders 

meeting or 180 days from the event that 

caused the deficiency to cure the 

deficiency.32 If a company does not 

regain compliance within the applicable 

cure period, the Listings Qualifications 

Department would issue a Staff 

Delisting Determination Letter.33

Pursuant to proposed Rule 5606(a), 

each Nasdaq-listed company would be 

required to annually disclose its boardlevel diversity data in a substantially 

similar format as the ‘‘Board Diversity 

Matrix.’’ In the proposed Board 

Diversity Matrix, a company would be 

required to provide the total number of 

directors on its board, and the company 

(other than a Foreign Issuer) would be 

required to provide the following: (1) 

The number of directors based on 

gender identity (female, male, or nonbinary34) and the number of directors 

who did not disclose gender; (2) the 

number of directors based on race and 

ethnicity (African American or Black, 

Alaskan Native or Native American, 

Asian, Hispanic or Latinx, Native 

Hawaiian or Pacific Islander, White, or 

Two or More Races or Ethnicities 35), 


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36See proposed Rule 5606(a). 

37See id. 

38See id. Proposed Rule 5606 would become 

operative one year after Commission approval of the 

proposal. See proposed Rule 5606(e). A company 

would be required to be in compliance with 

proposed Rule 5606 by the later of: (i) One calendar 

year from the approval date (‘‘Effective Date’’); or 

(ii) the date the company files its proxy statement 

or its information statement for its annual meeting 

of shareholders (or, if the company does not file a 

proxy or information statement, the date it files its 

Form 10–K or 20–F) during the calendar year of the 

Effective Date. 

39See Rule 5810(c)(2). 

40See id. 

41See Amendment No. 1 to the Board Diversity 

Proposal at 19. See also id. at Section 3.a.VII.D 

(discussing the alternatives that the Exchange has 

considered, including a mandate versus a 

disclosure-based approach). 

42See id. at 8–9, 12, 41. The Exchange states that, 

although gender diversity has improved among U.S. 

company boards in recent years, the pace of change 

has been gradual and the U.S. still lags behind 

jurisdictions that have focused on board diversity, 

and progress toward bringing underrepresented 

racial and ethnic groups into the boardroom has 

been slower. See id. at 12, Section 3.a.IV. 43See, e.g., letter from Kristi Mitchem, Chief 

Executive Officer, BMO Global Asset Management, 

to Vanessa Countryman, Secretary, Commission, 

dated January 11, 2021 (‘‘BMO Letter’’), at 2; letter 

from Brian V. Breheny, Skadden, Arps, Slate, 

Meagher & Flom LLP, to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021 

(‘‘Skadden Letter’’), at 2; letter from Lisa M. Fairfax, 

Alexander Hamilton Professor of Business Law, 

George Washington University Law School, to 

Vanessa Countryman, Secretary, Commission, dated 

January 4, 2021 (‘‘Fairfax Letter’’), at 10; letter from 

Molly Gochman, Founder & President, Stardust, to 

Vanessa Countryman, Secretary, Commission, dated 

January 4, 2021 (‘‘Stardust Letter’’), at 2; letter from 

Brenda Chia and Sanjiv Shah, Co-Chairs, 

Association of Asian American Investment 

Managers, dated December 28, 2020 (‘‘AAAIM 

Letter’’), at 2; letter from Betty T. Yee, California 

State Controller, to Vanessa Countryman, Secretary, 

Commission, dated December 21, 2020, at 1–2; 

letter from Hershel Harper, Chief Investment 

Officer, UAW Retiree Medical Benefits Trust, to 

Vanessa Countryman, Secretary, Commission, dated 

December 22, 2020 (‘‘UAW Letter’’), at 2–3; letter 

from Jay Huish, Executive Director, and William J. 

Coaker Jr., Chief Investment Officer, San Francisco 

Employees’ Retirement System, to Vanessa 

Countryman, Secretary, Commission, dated 

December 17, 2020, at 2. 44See, e.g., letter from Kurt Schacht, Head of 

Advocacy, CFA Institute Advocacy and Karina 

Karakulova Sr. Manager, Capital Markets Policy— 

Americas, CFA institute, to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021 

(‘‘CFA Letter’’) at 6; letter from Scott M. Stringer, 

New York City Comptroller, to Vanessa 

Countryman, Secretary, Commission, dated January 

4, 2021 (‘‘New York City Comptroller Letter’’), at 1 

and 3; letter from William J. Stromberg, President 

and CEO, and David Oestreicher, General Counsel 

and Corporate Secretary, T. Rowe Price Group, Inc., 

to Vanessa Countryman, Secretary, Commission, 

dated December 29, 2020 (‘‘T. Rowe Letter’’), at 2; 

letter from Joseph M. Torsella, Pennsylvania State 

Treasurer, to Vanessa Countryman, Secretary, 

Commission, dated January 4, 2021, at 1–2; AAAIM 

Letter at 2; letter from Douglas K. Chia, Soundboard 

Governance LLC, to Vanessa Countryman, 

Secretary, Commission, dated December 29, 2020 

(‘‘Soundboard Letter’’), at 2; letter from Amy L. 

Goodman and John F. Olson to Vanessa A. 

Countryman, Secretary, Commission, dated 

December 24, 2010 (‘‘Goodman and Olson Letter’’), 

at 2; letter from Patricia Gazda, Corporate 

Governance Officer, Ohio Public Employees 

Retirement System, to Vanessa Countryman, 

Secretary, Commission, dated December 23, 2020 

(‘‘OPERS Letter’’), at 2; UAW Letter at 2–3; letter 

from Barb Smoot, President and CEO, Women for 

Economic and Leadership Development, to Vanessa 

Countryman, Secretary, Commission, dated 

December 21, 2020. 

45See, e.g., letter from John W. Rogers, Jr., 

Chairman and Co-CEO, and Mellody Hobson, 

President and Co-CEO, Ariel Investments, LLC, to 

Vanessa Countryman, Secretary, Commission, dated 

December 29, 2020 (‘‘Ariel Letter’’), at 1; letter from 

Aeisha Mastagni, Portfolio Manager, Sustainable 

Investment and Stewardship Strategies, California 

State Teachers’ Retirement System, to Vanessa A. 

Countryman, Secretary, Commission, dated 

December 23, 2020, at 2. 

46See, e.g., letter from Publius Oeconomicis to 

Vanessa Countryman, Secretary, Commission, dated 

May 3, 2021 (‘‘Publius Letter II’’), at 1–2; letter from 

Peter Flaherty, Chair, and Paul D. Kamenar, 

Counsel, National Legal and Policy Center, to 

Vanessa Countryman, Secretary, Commission, dated 

January 14, 2021 (‘‘NLPC Letter’’); letter from Henry 

D. Wolfe, Chairman, De la Vega Occidental & 

Oriental Holdings L.L.C., to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021 (‘‘De 

La Vega Letter’’), at 2; letter from Dennis E. Nixon, 

President, International Bancshares Corporation, to 

Vanessa A. Countryman, Secretary, Commission, 

dated December 31, 2020 (‘‘IBC Letter’’), at 5; 

anonymous letter with pseudonym ‘‘Publius 

Oeconomicis’’ to Vanessa Countryman, Secretary, 

Commission, dated December 28, 2020 (‘‘Publius 

Letter’’), at 8–10; letter from Walter Donnellan 

dated December 14, 2020 (‘‘Donnellan Letter’’), at 

3. One commenter argues that the Exchange 

downplays the consequences of non-compliance, 

and that the proposed framework would require 

companies to either discriminate based on sex, race, 

or sexual orientation or assume a serious risk of 

reputational and litigation harm. See letter from C. 

Boyden Gray and Jonathan Berry, Boyden Gray & 

Associates, submitted on behalf of the Alliance for 

Fair Board Recruitment, dated April 6, 2021 

(‘‘Alliance for Fair Board Recruitment Letter’’), at 

31–33. Some commenters also argue that men and 

women do not choose or desire all professions 

equally. See letter from Richard Morrison, Research 

Fellow, Competitive Enterprise Institute, dated 

March 11, 2021 (‘‘CEI Letter’’), at 3–4; letter from 

Independent Women’s Forum, dated December 24, 

2020 (‘‘Independent Women’s Forum Letter’’), at 2. 

47See, e.g., letter from David R. Burton, Senior 

Fellow in Economic Policy, The Heritage 

Foundation, to J. Matthew DeLesDernier, Assistant 

Secretary, Commission, dated January 4, 2021 

(‘‘Heritage Foundation Letter’’), at 6–7; IBC Letter at 

2; Donnellan Letter at 2–3; Type A Letter. 

48See, e.g., De La Vega Letter at 2–3; Heritage 

Foundation Letter at 16. 

49See Nasdaq Response Letter II at 6–7. The 

Exchange also rejects the comments that claim that 

the proposal is a de facto quota, and states that the 

proposal is intended to provide shareholders with 

sufficient information to make an informed voting 

Continued 

disaggregated by gender identity (or did 

not disclose gender); (3) the number of 

directors who self-identify as LGBTQ+; 

and (4) the number of directors who did 

not disclose a demographic background 

under item (2) or (3) above.36

A company that qualifies as a Foreign 

Issuer may elect to use an alternative 

Board Diversity Matrix format.37 A 

Foreign Issuer would be required to 

provide the total number of directors on 

its board, and would also be required to 

provide the following: (1) Its country of 

principal executive offices; (2) whether 

it is a Foreign Private Issuer; (3) whether 

disclosure is prohibited under its home 

country law; (4) the number of directors 

based on gender identity (female, male, 

or non-binary) and the number of 

directors who did not disclose gender; 

(5) the number of directors who selfidentify as Underrepresented 

Individuals in its home country 

jurisdiction; (6) the number of directors 

who self-identify as LGBTQ+; and (7) 

the number of directors who did not 

disclose the demographic background 

under item (5) or (6) above.38

As proposed, if a company fails to 

adhere to proposed Rule 5606, the 

Exchange would notify the company 

that it is not in compliance with a 

listing standard and allow the company 

45 calendar days to submit a plan to 

regain compliance and, upon review of 

such plan, the Exchange may provide 

the company with up to 180 days to 

regain compliance.39 If the company 

does not submit a plan or regain 

compliance within the applicable time 

periods, it would be issued a Staff 

Delisting Determination, which the 

company could appeal to a Hearings 

Panel.40

The Exchange states that, with these 

provisions, it is proposing a disclosurebased framework and not a mandate.41

The Exchange also states that while 

some companies have made progress in 

diversifying their boardrooms, the 

national market system and the public 

interest would be well-served by a 

‘‘disclosure-based, business driven’’ 

framework for companies to embrace 

meaningful and multi-dimensional 

diversification of their boards.42

Some commenters express support for 

a ‘‘flexible’’ ‘‘comply-or-disclose’’ 

approach.43 Some commenters state that 

the proposal would not impose a quota 

for board diversity,44 and emphasize 

that the Exchange does not plan to judge 

the merits of a company’s explanation 

relating to board diversity.45 Other 

commenters express the concern that 

the Board Diversity Proposal would 

establish a quota for a minimum number 

of Diverse directors.46 Some 

commenters also argue that the proposal 

would substitute a regulator’s judgment 

for that of shareholders’ and companies’ 

boards and management in choosing 

directors,47 and that directors should be 

selected for their experience, 

competence, and skills.48

In response to comments, the 

Exchange notes that the Board Diversity 

Proposal would establish a disclosurebased framework and not a mandate or 

quota.49 According to the Exchange, 


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or investment decision, or to facilitate informed 

discussions with companies. See id. at 8. 

50See letter from Stephen J. Kastenberg, Ballard 

Spahr LLP, to Vanessa Countryman, Secretary, 

Commission, dated February 5, 2021 (submitted on 

behalf of the Exchange by its counsel) (‘‘Nasdaq 

Response Letter I’’), at 2. 

51See id. at 2–3. See also Nasdaq Response Letter 

II at 7. 

52See Nasdaq Response Letter I at 3. 

53See Nasdaq Response Letter II at 7. See also 

infra Section II.D. (describing the Exchange’s 

argument that companies are free to decide where 

to list and may switch listing markets). 

54One commenter states that, if the Exchange is 

truly interested in establishing only a disclosure 

framework, it should remove the diversity 

objectives and only require board-level statistical 

disclosure, or alternatively require all companies to 

disclose an explanation for the constitution of their 

boards. See Publius Letter II at 2. As discussed in 

Section II.C.2., it is not unreasonable to only require 

companies that do not meet the proposed diversity 

objectives to disclose why they have not done so, 

rather than to require all Nasdaq-listed companies 

to disclose their approach to board diversity. 

Moreover, as discussed in Section II.A.2., 

explanations from companies that do not meet the 

proposed diversity objectives, in addition to boardlevel statistical disclosure, would contribute to 

investors’ investment and voting decisions. 

55These costs would include the fixed costs 

associated with listing on a different exchange 

(such as the exchange’s application fee, and the 

legal and accounting expenses associated with 

ensuring that the issuer satisfies the listing 

standards of the new exchange), as well as the costs 

associated with communicating with investors 

about the transfer of listing. See Securities Act 

Release No. 10428 (October 24, 2017), 82 FR 50059, 

50065 (October 30, 2017) (‘‘Rule 146 Release’’). 

56These exchanges are Nasdaq; New York Stock 

Exchange LLC (‘‘NYSE’’); Cboe BZX Exchange, Inc. 

(‘‘BZX’’); and NYSE American LLC (‘‘NYSE 

American’’). 

57These exchanges are Nasdaq; NYSE; BZX; 

NYSE American; Investors Exchange LLC (‘‘IEX’’); 

Long-Term Stock Exchange, Inc. (‘‘LTSE’’); Nasdaq 

BX, Inc.; NYSE Arca, Inc.; and NYSE Chicago, Inc. 

See also, e.g., LTSE Rule 14.425(a)(1)(C) (requiring 

LTSE-listed issuers to adopt and publish a policy 

on the company’s approach to diversity and 

inclusion). 

58See Rule 146 Release, supra note 55, at 50064. 

The Exchange, along with other exchanges, 

currently have a number of listing standards 

governing a listed company’s board of directors. 

See, e.g., Nasdaq Rule 5600 Series; NYSE Listed 

Company Manual Section 303A.00. 

59See, e.g., Securities Exchange Act Release No. 

90893 (January 11, 2021), 86 FR 4166 (January 15, 

2021) (approving SR–NYSE–2020–94 relating to 

certain complimentary services); Securities 

Exchange Act Release No. 90729 (December 18, 

2020), 85 FR 84434 (December 28, 2020) (approving 

SR–NASDAQ–2020–060 relating to certain 

complimentary services). 

60See Amendment No. 1 to the Board Diversity 

Proposal at Section 3.a.V. The Exchange also states 

that such discussions reinforced the notion that if 

companies recruit by skill set and experience rather 

than title, diverse talent would satisfy demand. See 

id. at 19–20, 46. According to the Exchange, studies 

suggest that the traditional director candidate 

selection process may create barriers to considering 

qualified diverse candidates for board positions. 

See id. at 41–44, Section 3.b.II.A. 

61See id. at 9. The Exchange also states that, 

while conducting research on the state of board 

diversity among its listed companies, it 

encountered multiple key challenges, such as: (1) 

Inconsistent disclosure and definitions of 

‘‘diversity’’ across companies; (2) limited data on 

diverse characteristics outside of gender; (3) 

inconsistent or no disclosure of a director’s race, 

ethnicity, or other diversity attributes (e.g., 

nationality); (4) difficult-to-extract data because 

statistics are often embedded in graphics; and (5) 

aggregation of information, making it difficult to 

separate gender from other categories of diversity. 

See id. at 51. See also id. at 59, 107. 

proposed Rule 5605(f) would set forth 

‘‘aspirational diversity objectives’’ and 

not quotas, mandates, or set-asides, and 

companies that do not meet the 

objectives need only explain why they 

do not.50 The Exchange also provides 

examples of what might be contained in 

such an explanation and reiterates that 

it would not assess the substance of the 

explanation, but would merely verify 

that the company has provided one.51

The Exchange further states that the 

proposal would not require any 

particular board composition or require 

a company to select directors based on 

any criteria other than an individual’s 

qualifications for the position.52 The 

Exchange believes that its proposal 

would balance the calls of investors for 

companies to increase diverse 

representation on their boards with the 

need for companies to maintain 

flexibility and decision-making 

authority over their board 

composition.53

The Board Diversity Proposal would 

establish a disclosure-based framework 

for Nasdaq-listed companies that would 

contribute to investors’ investment and 

voting decisions. While the proposal 

may have the effect of encouraging some 

Nasdaq-listed companies to increase 

diversity on their boards, the proposed 

rules do not mandate any particular 

board composition. The proposal would 

not require a company to select a 

director solely because that person falls 

within the proposed definition of 

‘‘Diverse,’’ would not prevent 

companies and their shareholders from 

selecting directors based on experience, 

competence, and skills, and would not 

substitute a regulator’s judgment for 

companies’ or their shareholders’ 

judgment in selecting directors. Rather, 

a Nasdaq-listed company that does not 

meet the board diversity objectives may 

comply with proposed Rule 5605(f) by 

identifying the requirements of Rule 

5605(f)(2) that apply to the company 

and explaining why it does not meet the 

objectives, and the Exchange would not 

assess the substance of the company’s 

explanation.54

Some companies may prefer not to 

explain their approach to board 

diversity for various reasons, such as 

concerns regarding perceived 

reputational, legal, or other harm. 

However, the proposal could mitigate 

potential concerns by giving companies 

substantial flexibility in crafting the 

required explanation—including how 

much detail to provide—and the 

Exchange would not evaluate the 

substance of the explanation. Moreover, 

while there would be costs to listing 

elsewhere,55 companies that object to 

providing any explanation can choose 

instead to list on a different exchange. 

No company is required to list on 

Nasdaq. Rather, exchanges compete for 

listings, with four exchanges that 

currently list securities of operating 

companies 56 and nine exchanges that 

have rules for the listing of issuers on 

the exchange.57 Listing exchanges 

compete with each other for listings in 

many ways, including listing fees, 

listing standards, and listing services.58

In approving proposed rule changes 

relating to complimentary services that 

exchanges offer to issuers, including 

issuers that switch listing markets, the 

Commission has also explained that 

exchanges are responding to 

competitive market pressures.59 As 

discussed in Section II.D. below, the 

current proposals may provide another 

way in which the exchanges compete 

for listings. 

2. Demand for and Potential Benefits of 

the Proposed Disclosures 

In the Board Diversity Proposal, the 

Exchange states that its discussions with 

organizational leaders representing a 

broad spectrum of market participants 

and stakeholders (including members of 

the business, investor, governance, 

legal, and civil rights communities) 

revealed strong support for disclosure 

requirements that would standardize the 

reporting of board diversity statistics.60

The Exchange also states that current 

reporting of board diversity data is not 

provided in a consistent manner or on 

a sufficiently widespread basis and, as 

such, investors are not able to readily 

compare board diversity statistics across 

companies.61 In pointing out the ‘‘broad 

latitude’’ afforded to companies by 

Commission rules relating to board 

diversity and proxy disclosure, the 

Exchange states that the absence of a 

specific definition of ‘‘diversity’’ for 

such disclosures has resulted in current 

reporting of board-level diversity 


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62See id. at Sections 3.a.VI.A–B. 

63See id. at 51–52. See also id. at Section 

3.a.VI.C. (describing examples of support for board 

diversity disclosures). 

64See id. at 121. 

65See id. The Exchange also states that proposed 

Rule 5605(f) would empower companies to 

maintain decision-making authority over the 

composition of their boards. See id. at 122. The 

Exchange recognizes that directors may bring 

diverse perspectives, skills, and experiences to the 

board, notwithstanding that they have similar 

attributes; therefore, the Exchange believes that it is 

in the public interest to permit a company to choose 

whether to meet the proposed diversity objectives 

or explain why it does not. See id. at 129–30. 

66See id. at 122. 

67See id. at 122–23. 

68See id. at 110–13. 

69See id. at 110–11. 

70The Exchange also states that the disclosures 

under proposed Rule 5606 would provide a means 

for the Exchange to assess whether companies meet 

the diversity objectives under proposed Rule 

5605(f). See id. at 116. 

71See id. at 112. 

72See, e.g., letter from Aron Szapiro, Head of 

Policy Research, Morningstar, Inc., and Michael 

Jantzi, Chief Executive Officer, Sustainalytics, to 

Vanessa Countryman, Secretary, Commission, dated 

January 13, 2021 (‘‘Morningstar Letter’’), at 1–2; 

letter from Ramiro A. Cavazos, President and CEO, 

United States Hispanic Chamber of Commerce, to 

Vanessa Countryman, Secretary, Commission, dated 

January 4, 2021 (‘‘Hispanic Chamber of Commerce 

Letter’’), at 3; New York City Comptroller Letter at 

2–3; Fairfax Letter at 7; letter from Michael W. 

Frerichs, Illinois State Treasurer, to Vanessa 

Countryman, Secretary, Commission, dated 

December 31, 2020 (‘‘Illinois State Treasurer 

Letter’’), at 2; Constance F. Armstrong, Executive 

Director, The Boston Club, to Vanessa Countryman, 

Secretary, Commission, dated December 31, 2020 

(‘‘Boston Club Letter’’) at 1; letter from Roger W. 

Ferguson, Jr., President and CEO, Teachers 

Insurance and Annuity Association of America, and 

Jose Minaya, CEO, Nuveen, LLC, to Vanessa 

Countryman, Secretary, Commission, dated 

December 31, 2020 (‘‘TIAA Letter’’), at 2; letter from 

Esther Aguilera, President and CEO, Latino 

Corporate Directors Association, to Vanessa 

Countryman, Secretary, Commission, dated 

December 30, 2020 (‘‘LCDA Letter’’), at 9–11; letter 

from Robert W. Lovelace, Chief Executive Officer, 

Capital Research and Management Company, to 

Vanessa Countryman, Secretary, Commission, dated 

December 22, 2020 (‘‘Capital Research and 

Management Company Letter’’), at 2–3; letter from 

Rachel Stern, Executive Vice President, Chief Legal 

Officer and Global Head of Strategic Resources, 

FactSet Research Systems Inc., to Vanessa 

Countryman, Secretary, Commission, dated 

December 22, 2020 (‘‘FactSet Letter’’), at 1–2. Some 

commenters also note that not all investors 

currently have the same access to board diversity 

information. See, e.g., Fairfax Letter at 6 (stating 

that collection of board diversity data on a 

company-by-company basis creates informational 

asymmetries, particularly for investors without the 

time or resources to effectively engage in this 

manner); New York City Comptroller Letter at 3 

(stating that the proposal would level the playing 

field for smaller institutional investors who may not 

have the resources available to do the research and 

engagement necessary to ascertain the racial and 

ethnic diversity of boards). 

73See, e.g., BMO Letter at 1; letter from Olshan 

Frome Wolosky LLP to Vanessa A. Countryman, 

Secretary, Commission, dated January 6, 2021 

(‘‘Olshan Letter’’), at 3–4; letter from Steve Nelson, 

Chief Executive Officer, Institutional Limited 

Partners Association, to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021 

(‘‘Institutional Limited Partners Association 

Letter’’), at 2; TIAA Letter at 3; LCDA Letter at 6– 

10; letter from Mary Pryshlak, Head of Investment 

Research, Wellington Management Company LLP, 

to Vanessa Countryman, Secretary, Commission, 

dated December 30, 2020 at 1–2; Ariel Letter at 1. 

Some commenters also specifically express support 

for the proposed disclosures of the reason why a 

company does not meet the board diversity 

objectives and believe that such disclosures would 

contribute to investment or voting decisions. See, 

e.g., letter from Jeffrey P. Mahoney, General 

Counsel, Council of Institutional Investors, to 

Secretary, Commission, dated December 30, 2020, 

at 4–5; Ariel Letter at 1. 

74See, e.g., T. Rowe Letter at 1–2; UAW Letter at 

6; FactSet Letter at 1–2. 

75See, e.g., letter from Dev Stahlkopf, Corporate 

Vice President, General Counsel and Secretary, 

Microsoft Corporation, to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021 

(‘‘Microsoft Letter’’), at 2; New York City 

Comptroller Letter at 2–3. 

76See, e.g., letter from Olivia D. Morgan, 

Executive Director and Co-Founder, California 

Partners Project, to Vanessa Countryman, Secretary, 

Commission, dated January 3, 2020 [sic] 

(‘‘California Partners Project Letter’’), at 2; letter 

from Dieter Waizenegger, Executive Director, CtW 

Investment Group, to Vanessa Countryman, 

Secretary, Commission, dated December 31, 2020 

(‘‘CtW Letter’’), at 2; Soundboard Letter at 2; UAW 

Letter at 6; letter from Sarah Keohane Williamson, 

Chief Executive Officer, Ariel Fromer Babcock, 

Managing Director, Head of Research, and Victoria 

Tellez Leal, Senior Associate, Research, 

FCLTGlobal, to Vanessa Countryman, Secretary, 

Commission, dated December 18, 2020, at 3. 

77See, e.g., letter from Fran Seegull, President, 

U.S. Impact Investing Alliance, to Vanessa 

Countryman, Secretary, Commission, dated March 

5, 2021 (‘‘Alliance Letter’’), at 1; CFA Letter at 3; 

letter from Edgar Hernandez, Assistant Director, 

Capital Stewardship, Service Employees 

International Union, to Vanessa A. Countryman, 

Secretary, Commission, dated January 4, 2020 [sic] 

(‘‘SEIU Letter’’), at 2; Illinois State Treasurer Letter 

at 1–2. 

78See, e.g., BMO Letter at 1; SEIU Letter at 2; 

letter from Alfred P. Poor, Chief Executive Officer, 

Ideanomics, Inc., to Vanessa Countryman, 

Secretary, Commission, dated December 28, 2020 

(‘‘Ideanomics Letter’’), at 1, 3; letter from Kimberly 

Jeffries Leonard, National President, The Links, 

Incorporated, to Vanessa A. Countryman, Secretary, 

Commission, dated December 17, 2020 (‘‘Links 

Letter’’), at 2. 

79See, e.g., letter from Paul M. Kinsella, Emily J. 

Oldshue, Jeremiah Williams, Partners, Ropes & Gray 

LLP, to Vanessa Countryman, Secretary, 

Commission, dated December 31, 2020 (‘‘Ropes & 

Gray Letter’’), at 4; UAW Letter at 6. 

statistics being significantly unreliable 

and unusable to investors.62 The 

Exchange notes that the lack of 

transparency creates barriers to 

investment analysis, due diligence, and 

academic study, and affects investors 

who are increasingly basing public 

advocacy, proxy voting, and direct 

shareholder-company engagement 

decisions on board diversity 

considerations.63

The Exchange asserts that the 

disclosure-based framework of proposed 

Rule 5605(f) may influence corporate 

conduct if a company chooses to meet 

the proposed diversity objectives,64 and 

could help increase opportunities for 

Diverse candidates.65 Moreover, the 

Exchange states that, if a company does 

not meet the proposed objectives, the 

disclosure under proposed Rule 

5605(f)(3) would provide analysts and 

investors with a better understanding 

about a company’s reasons for not doing 

so.66 The Exchange believes that this 

disclosure would enable the investment 

community to conduct more informed 

analyses of, and have more informed 

conversations with, companies and 

improve the quality of information 

available to investors who rely on this 

information to make informed 

investment and voting decisions.67

In addition, the Exchange believes 

that the disclosure-based framework of 

proposed Rule 5606 would eliminate 

data collection inaccuracies, decrease 

investors’ costs, enhance investors’ 

ability to utilize the information 

disclosed, and make information 

available to investors who otherwise 

would not be able to obtain 

individualized disclosures.68 The 

Exchange also states that proposed Rule 

5606 would protect investors that view 

information related to board diversity as 

material to their investment and voting 

decisions, and enhance investor 

confidence by assisting investors in 

making more informed decisions.69

Moreover, the Exchange believes that 

the disclosures would provide 

consistent information to the public and 

would enable investors to continually 

review the board composition of a 

company to track trends,70 as well as 

simplify or eliminate the need for a 

company to respond to multiple 

investor requests for board diversity 

information.71

Many commenters who support the 

Board Diversity Proposal believe that 

investors currently do not have 

sufficient access to consistent, 

meaningful, or reliable board diversity 

information.72 Many commenters 

believe that board diversity information 

is important for investment decision 

making,73 investment strategies and 

analysis,74 and voting decisions.75 Some 

commenters also believe that the 

availability of board diversity 

information would facilitate studies on 

the impact of board diversity.76 In 

addition, many commenters believe that 

the proposed board diversity disclosures 

would be material to investors,77 would 

improve access to transparent and 

comparable board diversity disclosures 

across companies,78 would allow more 

efficient and less costly access to and 

usage of board diversity information,79

and would allow investors to monitor 


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80See, e.g., Fairfax Letter at 7; letter from Lisa 

Hayles, Investment Manager, Trillium Asset 

Management, to Vanessa Countryman, Secretary, 

Commission, dated January 4, 2021 (‘‘Trillium 

Letter’’), at 3; letter from Charlotte LaurentOttomane, Executive Director, and Toni Wolfman, 

Co-Chair, Public Policy Outreach Committee, Thirty 

Percent Coalition, to Vanessa Countryman, 

Secretary, Commission, dated January 1, 2021 

(‘‘Thirty Percent Coalition Letter’’), at 1; CtW Letter 

at 2; OPERS Letter at 1–2. 

81See, e.g., FactSet Letter at 2; letter from Fiona 

Ma, California State Treasurer, to Vanessa 

Countryman, Secretary, Commission, dated 

December 15, 2020 (‘‘California State Treasurer 

Letter’’). See also, e.g., letter from Thomas Chow, 

Irene Liu, and Andrew Song, Co-Chairs, Bay Area 

Asian American General Counsel, to Vanessa 

Countryman, Secretary, Commission, dated January 

4, 2021, at 2 (stating that the Board Diversity 

Proposal provides an appropriate impetus to depart 

from the traditional director search process and to 

diversify the candidate pool). 

82See, e.g., Alliance for Fair Board Recruitment 

Letter at 43; CEI Letter at 1–2; letter from John 

Quigley to Vanessa Countryman, Secretary, 

Commission, dated January 25, 2021 (‘‘Quigley 

Letter’’), at 1; Heritage Foundation Letter at 3, 

5–6; letter from Boyden Gray & Associates PLLC, 

dated January 4, 2020 [sic] (‘‘Project on Fair 

Representation Letter’’), at 5; Publius Letter at 3. 

See also NLPC Letter at 4 (stating that it is in a 

company’s interest to promote and advertise the 

diversity of its board if it believes that such 

diversity would attract investors, regardless of, or 

in addition to, the economic performance of the 

company). 

83See, e.g., letter from Pat Toomey et al, U.S. 

Senators, to Allison Herren Lee, Acting Chair, 

Commission, dated February 12, 2021 (‘‘Toomey 

Letter’’), at 3; NLPC Letter at 3–4 (also arguing that 

information is available on a company’s website 

with the biographical information of its board 

members and officers, and that investors are 

unlikely to access such information from the 

Commission); Publius Letter at 2–3. 

84See, e.g., Project on Fair Representation Letter 

at 5; letter from Jerry D. Guess, Founder, Chairman, 

and CEO, Guess & Co. Corporation, to Martha 

Miller, Director, Office of the Advocate for Small 

Business Formation, Commission, dated December 

2, 2020 (‘‘Guess Letter’’), at 2. 

85See Nasdaq Response Letter II at 20. 

86See id. at 12. 

87See id. at 20. 

88See id. at 13, 25. 

89See id. at 25. The Exchange also states that, 

absent encouragement, progress toward increased 

board diversity has been demonstrably slow, and 

that regulatory action has proven effective in 

removing barriers and increasing board diversity 

among those traditionally underrepresented in 

other jurisdictions. See id. at 15, 25–26. 

90 In particular, companies would be required to: 

make board-level diversity disclosures in a 

substantially similar format as the Board Diversity 

Matrix; following the first year of disclosure, 

disclose the current year and immediately prior 

year Board Diversity Matrix; provide the Board 

Diversity Matrix in a searchable format; and provide 

the required disclosures in a proxy statement or 

information statement (or if a company does not file 

a proxy, in its Form 10–K or 20–F) in advance of 

the company’s annual shareholders meeting or 

provide the required disclosures on the company’s 

website concurrently with the filing of the 

company’s proxy statement or information 

statement (or, if the company does not file a proxy, 

its Form 10–K or 20–F). 

91See, e.g., Amendment No. 1 to the Board 

Diversity Proposal at 8 n.9, 54 n.142 (referencing 

statements from Vanguard, State Street Global 

Advisors, and BlackRock that call for companies to 

disclose board diversity information); id. at 54 

nn.139–40 (referencing petitions for Commission 

rulemaking from groups of institutional investors 

that call for disclosures of board diversity 

information); id. at 54 n.143 (referencing an 

initiative by a state treasurer and group of 

institutional investors calling for Russell 3000 

companies to disclose board diversity information); 

id. at 57 n.152 (referencing a letter from various 

business associations expressing support for the 

passage of a bill by the U.S. House of 

Representatives that would require board diversity 

disclosures). 

92Commenters who express support for the 

proposed disclosures include institutional 

investors, investment managers, listed companies, 

and individual investors. See, e.g., letter from 

Cynthia Overton to Vanessa Countryman, Secretary, 

Commission, dated January 3, 2021; letter from Dan 

Dees, Co-Head Investment Banking Division, 

Goldman Sachs Group, Inc., to Secretary, 

Commission, dated January 1, 2021 (‘‘Goldman 

Sachs Letter’’); letter from Marcie Frost, Chief 

Executive Officer, California Public Employees’ 

Retirement System, to Vanessa Countryman, 

Secretary, Commission, dated December 31, 2020; 

TIAA Letter; letter from Jo Brickman, dated 

December 18, 2020. They also include listed 

companies. See, e.g., Microsoft Letter; letter from 

Sheryl Sandberg, Chief Operating Officer, Facebook 

Inc., to Vanessa Countryman, Secretary, 

Commission, dated January 3, 2021; letter from Jeff 

Ray, CEO, Brightcove, to Vanessa Countryman, 

dated December 23, 2020 (‘‘Brightcove Letter’’). 

and assess companies’ board diversity.80

Moreover, some commenters believe 

that the proposal would enhance 

progress in increasing board diversity.81

Some commenters, by contrast, argue 

that the perceived investor demand for 

diverse boards and diversity 

information is overstated, and if 

diversity requirements increase returns, 

then boards, management, and 

shareholders would not require any 

regulatory mandate to adopt them.82

Further, some commenters argue that 

the proposal is unnecessary and that 

company boards are already becoming 

more diverse,83 and some commenters 

argue that shareholders have the power 

to push for diversity changes in the 

boardroom.84

In response, the Exchange states that 

investors are increasingly interested in 

board diversity data, as investors view 

board diversity as a key indicator of 

corporate governance.85 Moreover, the 

Exchange states that the wave of 

investors increasingly calling for 

companies to disclose diversity metrics 

and diversify their boards, and basing 

their voting decisions on whether 

companies do or do not, demonstrates 

that investors consider diversity 

disclosures material to their voting and 

investment decisions.86 The Exchange 

explains that its goal is to facilitate the 

collection, reliability, and uniformity of 

board diversity data, while expanding 

access to the information.87 The 

Exchange also states that its proposal 

would level the playing field for retail 

and institutional investors, and decrease 

the cost and time associated with data 

collection for all investors, by providing 

them with accessible, comparable, and 

transparent information by which they 

could critically evaluate a company’s 

decisions with respect to how, whether, 

or when to pursue board diversity.88

And the Exchange reiterates that the 

proposal provides flexibility for 

companies that do not wish to achieve 

the diversity objectives or wish to do so 

on a different timeline.89

The Commission finds that the Board 

Diversity Proposal would provide 

widely available, consistent, and 

comparable information that would 

contribute to investors’ investment and 

voting decisions. Because the Exchange 

would define ‘‘Diverse’’ for purposes of 

the proposed disclosures and would 

require consistent format and timing for 

the proposed disclosures,90 the proposal 

would make it more efficient and less 

costly for investors to collect, use, and 

compare information on board diversity. 

The reduced cost and improved 

efficiency in collecting, using, and 

comparing such information could 

enhance investors’ investment and 

voting decision-making processes, and 

enhance investors’ ability to make 

informed investment and voting 

decisions. Because the proposal would 

make such information widely available 

on the same basis to all investors, the 

proposal would also mitigate any 

concerns regarding unequal access to 

information that may currently exist 

between certain (likely larger and more 

resourceful) investors who could obtain 

the information and other (likely 

smaller) investors who may not be able 

to do so. Accordingly, the Commission 

finds that the proposal is designed to 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. 

The diverse collection of commenters 

who expressed interest in board 

diversity information, including 

institutional investors, investment 

managers, listed companies, and 

individual investors, as well as 

statements made by institutional 

investors, asset managers, and business 

organizations,91 demonstrates the broad 

demand for this information.92

Moreover, while investors may have 

differing views regarding whether 

companies should increase board 

diversity and whether and how board 

diversity affects company performance 

and governance, the proposed 

disclosures would contribute to 

investors’ investment and voting 


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93See Amendment No. 1 to the Board Diversity 

Proposal at 13. The Exchange states that studies 

have identified positive relationships between 

board diversity and commonly used financial 

metrics, including higher returns on invested 

capital, returns on equity, earnings per share, 

earnings before interest and taxation margin, asset 

valuation multiples, and credit ratings. See id. at 13, 

Section 3.a.III.A. The Exchange also points to a 

report that suggests that the relationship between 

board gender diversity and corporate performance 

may extend to LGBTQ+ diversity. See id. at 25. 

94See id. at 25–28 (referencing Carter et al., infra 

note 119, and the U.S. Government Accountability 

Office’s conclusion that the mixed nature of various 

academic and empirical studies may be due to 

differences in methodologies, data samples, and 

time periods). 

95See id. at 28. 

96See id. at 29. 

97See id. at 29, Section 3.a.III.B. The Exchange 

states that studies have found that gender-diverse 

boards or audit committees are associated with: 

More transparent public disclosures and less 

information asymmetry; better reporting discipline 

by management; a lower likelihood of manipulated 

earnings through earnings management; an 

increased likelihood of voluntarily disclosing 

forward-looking information; a lower likelihood of 

receiving audit qualifications due to errors, noncompliance, or omission of information; and a 

lower likelihood of securities fraud. See id. at 13, 

Section 3.a.III.B. In addition, the Exchange states 

that studies found that having at least one woman 

on the board is associated with a lower likelihood 

of material weaknesses in internal control over 

financial reporting and a lower likelihood of 

material financial restatements. See id. at 13, 

Section 3.a.III.B, Section 3.b.II.B. 

98See id. at 29, Section 3.a.III.B. 

99See id. at Section 3.a.III.C. 

100See, e.g., letter from Kewsong Lee, Chief 

Executive Officer, The Carlyle Group, to Vanessa 

Countryman, Secretary, Commission, dated March 

16, 2021 (‘‘Carlyle Letter’’), at 1; letter from Joan 

Haffenreffer, President, Women’s Forum of New 

York, to Vanessa Countryman, Secretary, 

Commission, dated January 4, 2021 (‘‘Women’s 

Forum Letter’’), at 1–2; letter from Abraham Kim, 

Executive Director, Council of Korean Americans, 

to Vanessa Countryman, Secretary, Commission, 

dated January 3, 2021, at 1; Goldman Sachs Letter 

at 1; T. Rowe Letter at 1–2; Ideanomics Letter at 2, 

4; letter from Aaron Meder, CEO, LGIM America, 

to Vanessa Countryman, Secretary, Commission, 

dated December 23, 2020 (‘‘LGIM America Letter’’), 

at 2; Goodman and Olson Letter at 1–2; letter from 

Mercy Investment Services, Inc., to Vanessa 

Countryman, Secretary, Commission, dated 

December 22, 2020 (‘‘Mercy Investment Letter’’), at 

1; letter from Luan Jenifer, President, Miller/ 

Howard Investments, Inc., to Vanessa Countryman, 

Secretary, Commission, dated December 22, 2020 

(‘‘Miller/Howard Letter’’), at 1; letter from Kerrie 

Waring, Chief Executive Officer, International 

Corporate Governance Network, to Jay Clayton, 

Chairman, Commission, dated December 16, 2020, 

at 2. 

101See, e.g., Carlyle Letter at 1; letter from Dorri 

McWhorter, Chief Executive Officer, YWCA 

Metropolitan Chicago, to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021; 

Women’s Forum Letter at 2; AAAIM Letter at 2; 

Miller/Howard Letter at 1; letter from Seth Brody, 

Partner and Global Head of the Operational 

Excellence Practice, Apax Partners, to Vanessa 

Countryman, Secretary, Commission, dated 

December 16, 2020. 

102See, e.g., Carlyle Letter at 1; letter from Kerry 

E. Berchem, Akin Gump Strauss Hauer & Feld LLP, 

to Vanessa Countryman, Secretary, dated January 4, 

2021 (‘‘Akin Gump Letter’’), at 2; Goldman Sachs 

Letter at 1; Capital Research and Management 

Company Letter at 1; FactSet Letter at 1. 

103See, e.g., Akin Gump Letter at 4; letter from 

Michelle Dunstan, SVP, Global Head of Responsible 

Investing, and Diana Lee, AVP, Director of 

Corporate Governance, AllianceBernstein L.P., to 

Vanessa A. Countryman, Secretary, Commission, 

dated January 4, 2021 (‘‘AllianceBernstein Letter’’), 

at 1; Hispanic Chamber of Commerce Letter at 3. 

104See, e.g., LGIM America Letter at 2; Miller/ 

Howard Letter at 1. 

105See, e.g., Women’s Forum Letter at 2; Miller/ 

Howard Letter at 1; Douglas B. Sieg, Managing 

Partner, Lord Abbett, to Vanessa Countryman, 

Secretary, Commission, dated December 18, 2020, 

at 1. 

106See, e.g., FactSet Letter at 2; Miller/Howard 

Letter at 1; UAW Letter at 3–4. 

107See, e.g., Akin Gump Letter at 4; California 

Partners Project Letter at 2; Capital Research and 

Management Company Letter at 1–2. 

108See, e.g., Publius Letter II at 2; Toomey Letter 

at 2; Heritage Foundation Letter at 7–10; Project on 

Fair Representation Letter at 3–4; letter from Scott 

Shepard, Free Enterprise Project, National Center 

for Public Policy Research, to Vanessa Countryman, 

Secretary, Commission, dated December 30, 2020 

(‘‘Free Enterprise Project Letter’’), at 2–3; Publius 

Letter at 4–7; letter from John Richter dated 

December 12, 2020 (‘‘Richter Letter’’), at 1–2. 

109See Heritage Foundation Letter at 7–10. See 

also, e.g., Alliance for Fair Board Recruitment Letter 

at 7–31; De La Vega Letter at 2; Richter Letter at 1. 

decisions regardless of their views on 

whether board diversity is desirable or 

beneficial. For example, for investors 

who support board diversity, the 

proposed disclosures could inform their 

decision on issues related to corporate 

governance, including director 

elections, and company explanations as 

to why they do not meet the diversity 

objectives could better inform those 

investors as to the risks and costs of 

increased board diversity. And for 

investors who do not believe that having 

additional ‘‘Diverse’’ directors would be 

beneficial for a company, the proposed 

disclosures could inform their decision 

to vote to preserve the existing board 

composition in a company. The 

disclosures’ focus on providing greater 

transparency regarding existing board 

composition and companies’ 

approaches to board diversity—rather 

than mandating any particular board 

composition or requiring Nasdaq-listed 

companies to change the composition of 

their boards—will provide investors 

with board-level diversity statistics and 

explanations for certain companies’ 

approaches to board diversity, which 

would contribute to investors’ 

investment and voting decisions, 

including decisions related to 

companies’ board compositions. 

B. Potential Effects of Board Diversity on 

Companies and Investors 

In the Board Diversity Proposal, the 

Exchange states that it has reviewed 

dozens of empirical studies and found 

that an extensive body of empirical 

research demonstrates that diverse 

boards are positively associated with 

improved corporate governance and 

company performance.93 While the 

Exchange states that the overwhelming 

majority of empirical studies it has 

reviewed indicate that board diversity is 

positively associated with company 

performance, it acknowledges that the 

results of some studies on gender 

diversity are mixed.94 Nevertheless, the 

Exchange believes that ‘‘there is a 

compelling body of credible research on 

the association between company 

performance and board diversity’’ and, 

at a minimum, the academic and 

empirical studies support the 

conclusion that board diversity does not 

have adverse effects on company 

performance.95

The Exchange also states that there is 

substantial evidence that board diversity 

promotes investor protection, including 

by enhancing the quality of a company’s 

financial reporting, internal controls, 

public disclosures, and management 

oversight.96 According to the Exchange, 

more than a dozen studies have found 

a positive association between gender 

diversity and important investor 

protections,97 and some academics 

assert that such findings may extend to 

other forms of diversity, including racial 

and ethnic diversity.98 The Exchange 

also states that it has reviewed studies 

suggesting that board diversity could 

enhance a company’s ability to monitor 

management by reducing ‘‘groupthink’’ 

and improving decision-making.99

Some commenters similarly believe 

that there are benefits associated with 

board diversity, such as improved board 

decision-making,100 corporate 

governance,101 financial performance or 

shareholder value,102 risk mitigation,103

innovation,104 investor protection,105

investor confidence,106 and corporate 

culture.107 By contrast, some 

commenters argue that the Exchange has 

not demonstrated causation between 

board diversity and the benefits 

described in the Board Diversity 

Proposal, and that the supporting 

studies cited by the Exchange do not 

show that diversity on a company’s 

board causes, rather than is merely 

correlated with, performance 

enhancement.108 Commenters further 

assert that the peer-reviewed economics 

literature is inconclusive, with most 

studies showing little or no discernable 

effect based on the sexual, racial, or 

ethnic composition of corporate 

boards.109 In addition, some 

commenters state that some studies 

have not found a positive correlation 

between board diversity and benefits, 

and point out the lack of research 

relating to LBGTQ+ board 


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44432 Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices 

110See, e.g., Toomey Letter at 2; Donnellan Letter 

at 1; Project on Fair Representation Letter at 6–7; 

Publius Letter at 6–7; Alliance for Fair Board 

Recruitment Letter at 26–28. 

111See, e.g., letter from Samuel S. Guzik, Guzik 

& Associates, to J. Matthew DeLesDernier, Assistant 

Secretary, Commission, dated April 5, 2021 (‘‘Guzik 

Letter’’), at 3–5; letter from Theo Vermaelen, dated 

December 29, 2020. 

112See Toomey Letter at 2. 

113See id. at 3. Another commenter also predicts 

that the proposal will weaken corporate 

governance. See De La Vega Letter at 2–3. 

114See Nasdaq Response Letter II at 8–10. 

115See id. at 10. 

116See id. 

117See id. at 28. 

118The studies and their findings are also subject 

to the various caveat and limitations that are 

described in the studies. 

119See, e.g., Gennaro Bernile et al., Board 

Diversity, Firm Risk, and Corporate Policies, 127 J. 

Fin. Econ. 588, 605 (2018); David A. Carter et al., 

The Gender and Ethnic Diversity of US Boards and 

Board Committees and Firm Financial Performance, 

18 Corporate Governance 396, 410 (2010); Jason M. 

Thomas & Megan Starr, The Carlyle Group, Global 

Insights: From Impact Investing to Investing for 

Impact 5 (2020). See also Olga Kuzmina & Valentina 

Melentyeva, Gender Diversity in Corporate Boards: 

Evidence from Quota-Implied Discontinuities 

(CEPR, Discussion Paper No. DP14942, 2021), 

available at https://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=3638047; Muhammad 

Nadeem et al., Women on Boards, Firm Risk and 

the Profitability Nexus: Does Gender Diversity 

Moderate the Risk and Return Relationship?, 64 

Int’l Rev. Econ. & Fin. 427 (2019). 

120See Bernile et al., supra note 119. 

121See Rene ́e B. Adams & Daniel Ferreira, 

Women in the Boardroom and Their Impact on 

Governance and Performance, 94 J. Fin. Econ. 291 

(2009). This study observes that the effect of gender 

diversity on firm performance may be negative and 

in general depends on the specification of the 

analysis. 

122See Alliance for Fair Board Recruitment Letter 

at 2, 24. 

123See, e.g., Kenneth R. Ahern & Amy K. Dittmar, 

The Changing of the Boards: The Impact on Firm 

Valuation of Mandated Female Board 

Representation, 127 Q.J. Econ. 137 (2012); David A. 

Matsa & Amalia R. Miller, A Female Style in 

Corporate Leadership? Evidence from Quotas, 5 

a.m. Econ. J. Applied Econ. 136 (2013). As an 

additional example, some studies of the effects of 

the 2018 California law requiring increased board 

gender diversity have reported indications of 

negative effects on shareholder wealth. See, e.g., 

Daniel Greene et al., Do Board Gender Quotas Affect 

Firm Value? Evidence from California Senate Bill 

No. 826, J. Corp. Fin., (February 2020); Sunwoo 

Hwang et al., Mandating Women on Boards: 

Evidence from the United States (Kenan Institute of 

Private Enterprise, Research Paper No. 18–34, 

2018), available at https://ssrn.com/abstract=

3265783. 124See ;yvind B<hren & Siv Staubo, Does 

Mandatory Gender Balance Work? Changing 

Organizational Form to Avoid Board Upheaval, 28 

J. Corp. Fin. 152 (2014). 125See B. Espen Eckbo et al., Valuation Effects of 

Norway’s Board Gender-Quota Law Revisited 

(ECGI, Finance Working Paper No. 463/2016, 2021), 

available at https://ssrn.com/abstract=2746786. 126See A.B. 979, 2019–2020 Leg., Reg. Sess. (Cal. 

2020) (amending Cal. Corp. Code Section 301.3 and 

adding Cal. Corp. Code Sections 301.4 and 2115.6), 

available at http://leginfo.legislature.ca.gov/faces/ 

billTextClient.xhtml?bill_id=201920200AB979; S.B. 

826, 2017–2018 Leg., Reg. Sess. (Cal. 2018) (adding 

Cal. Corp. Code Sections 301.3 and 2115.5), 

available at https://leginfo.legislature.ca.gov/faces/ 

billNavClient.xhtml?bill_id=201720180SB826. 

127See Larry Fauver et al., Board Reforms and 

Firm Value: Worldwide Evidence, 125 J. Fin. Econ. 

120 (2017) (providing evidence of a greater increase 

in firm value from comply-or-explain-based reforms 

than for rule-based reforms in a study of the impact 

of corporate board reforms on firm value across 41 

countries). 

representation and diversity relating to 

Underrepresented Minorities.110

Moreover, some commenters argue that 

there is academic work reporting that 

diversifying boards can harm financial 

performance or shareholder value.111

Another commenter argues that the 

proposal is not consistent with a free 

market because the proposed diversity 

requirement does not demonstrably 

improve corporate performance, and 

could sometimes harm it.112 This 

commenter further argues that the 

proposal may result in increases in the 

size of boards, potentially hindering 

corporate oversight and governance.113

With respect to comments that 

disagree that board diversity is linked to 

enhanced company performance, 

innovation, long-term sustainable 

returns, or investor protection, the 

Exchange states that ‘‘the weight of 

empirical evidence’’ supports its belief 

in the benefits of board diversity for 

companies that choose to meet the 

proposed diversity objectives.114 With 

respect to commenters’ view that there 

is insufficient evidence to establish a 

positive relationship between LGBTQ+ 

diversity and board performance, the 

Exchange reiterates that it is reasonable 

and in the public interest to treat 

LGBTQ+ status as ‘‘inextricably’’ 

intertwined with gender identity.115

The Exchange also states that Section 

6(b)(5) of the Act does not require the 

Exchange to show that its listing rules 

enhance the financial performance of 

listed companies.116 With respect to the 

comment that adding board members to 

satisfy the proposal could create less 

effective corporate oversight and 

governance due to a larger board, the 

Exchange states that the proposal would 

not require that companies add or 

remove any directors in order to 

increase diversity.117

The conclusions from the studies 

together referenced by the Exchange and 

commenters on the effects of changes in 

board diversity on investors are 

mixed.118 Some of the results from the 

studies cited by the Exchange and 

commenters are consistent with the 

view that increases in board diversity 

cause increases in shareholder 

wealth.119 One study concludes that 

greater board diversity leads to better 

firm performance, consistent with 

diversity fostering more efficient (real) 

risk-taking, firms with greater board 

diversity are found to invest persistently 

more in research and development and 

have more efficient innovation 

processes.120 Other studies have 

concluded that increases in board 

diversity may not be beneficial to 

investors. For example, one study 

concludes that the effect of gender 

diversity on firm performance is 

negative for some companies.121 In 

addition, some studies of some board 

diversity mandates have concluded they 

are not beneficial to investors.122 For 

example, studies of the effects of the 

board diversity mandates in Norway 

have presented indications that the 

mandates caused a decline in company 

performance and reduced shareholder 

wealth.123 According to one study, some 

companies chose to go private rather 

than comply with the Norway board 

diversity mandate.124 A more recent 

study, however, questions the statistical 

significance of these findings.125 Taken 

together, studies of the effects of board 

diversity are generally inconclusive, and 

suggest that the effects of even 

mandated changes remain the subject of 

reasonable debate. 

Studies of board diversity mandates, 

in any event, do not provide a reliable 

basis for evaluating the likely overall 

effects of the Board Diversity Proposal, 

which does not mandate any particular 

board composition. Unlike companies 

in those studies, Nasdaq-listed 

companies would have the option of 

providing an explanation for their board 

composition under the new listing 

standard. This is distinct from facing a 

fine as an alternative to compliance or 

possibly facing the requirement to 

dissolve for non-compliance. Some of 

the mandates requiring increased board 

diversity do not present companies with 

the option of providing an explanation 

rather than facing a sanction, or any 

other option besides compliance with 

the mandate.126 According to one study, 

comply-or-explain corporate governance 

reforms have been found to increase 

shareholder wealth more than corporate 

governance mandates, on average.127

Further, under the Board Diversity 

Proposal, Nasdaq-listed companies 

would be required to disclose boardlevel diversity statistics, and those 

companies that do not meet the 

proposed diversity objectives would be 

required to choose between providing 

an explanation and increasing the 

diversity of their boards. In responding 

to the disclosure requirements, 

companies can consider the analyses 

and conclusions from academic and 


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128See Amendment No. 1 to the Board Diversity 

Proposal at 50–51. 

129See id. at 107. 

130See id. The Exchange also states that the 

categories it has proposed to comprise an 

Underrepresented Minority are consistent with the 

categories reported to the Equal Employment 

Opportunity Commission (‘‘EEOC’’) through the 

Employer Information Report EEO–1 Form (‘‘EEO– 

1’’). See id. at 9–10, 61. In addition, the Exchange 

states that, while the EEO–1 report refers to 

‘‘Hispanic or Latino’’ rather than ‘‘Latinx,’’ the 

Exchange proposes to use the term ‘‘Latinx’’ to 

apply broadly to all gendered and gender-neutral 

forms that may be used by individuals of Latin 

American heritage. See id. at 61 n.160. The 

Exchange further states that the terms in the 

proposed definition of LGBTQ+ are similar to the 

identities defined in California’s A.B. 979, but have 

been expanded to include the queer community. 

See id. at 61. 

131See, e.g., Women’s Forum Letter at 2; Miller/ 

Howard Letter at 2. See also, e.g., Fairfax Letter at 

8–9; CFA Letter at 4–5. 

132See Goodman and Olson Letter at 2. 

133See, e.g., Toomey Letter at 1–3; Heritage 

Foundation Letter at 16; Richter Letter at 2–3. 

134See, e.g., letter from National LGBT Chamber 

of Commerce (NGLCC), National Veteran-Owned 

Business Association (NaVOBA), Out & Equal 

Workplace Advocates, U.S. Black Chambers, Inc. 

(USBC), United States Hispanic Chamber of 

Commerce (USHCC), US Pan Asian American 

Chamber of Commerce Education Foundation 

(USPAACC), and Women Impacting Public Policy 

(WIPP), to Vanessa Countryman, Secretary, 

Commission, dated April 2, 2021; letter from The 

Members of the National Disability Alliance, to 

Adena T. Friedman, President and Chief Executive 

Officer, Nasdaq, dated March 9, 2021; letter from 

Maria Town, President & CEO, American 

Association of People with Disabilities, and Jill 

Houghton, President & CEO, Disability:IN, to 

Allison Lee, Acting Chair, Commission, dated 

February 2, 2021; letter from Janice S. Lintz, CEO, 

Hearing Access & Innovations, Inc., dated January 

25, 2021; letter from Jennifer Laszlo Mizrahi, 

President, RespectAbility, Carol Glazer, President, 

National Organization on Disability, Katherine 

McCary, CEO, Disability: IN DC Metro, William D. 

Goren, Attorney and Consultant, Americans with 

Disabilities, Thomas Foley, President, National 

Disability Institute, and Sean Luechtefeld, Senior 

Director Communications, ANCOR, to Vanessa 

Countryman, Secretary, dated January 25, 2021; 

letter from Zainab Alkebsi, President, Board of 

Directors, Deaf and Hard of Hearing Bar 

Association, to Vanessa Countryman, Secretary, 

Commission, dated January 25, 2021; letter from 

Victor Calise, Commissioner, New York City 

Mayor’s Office for People with Disabilities, dated 

January 8, 2021; letter from Nicholas D. Lawson, 

J.D. Candidate, Georgetown University Law Center, 

to Vanessa Countryman, Secretary, Commission, 

dated January 15, 2021; letter from Robert Ludke, 

Founder, Ludke Consulting, LLC, and Regina Kline, 

Founder and CEO, SmartJob, LLC, to Vanessa 

Countryman, Secretary, Commission, dated 

December 31, 2020; CFA Letter at 5; Ideanomics 

Letter at 4; letter from James Morgan dated 

December 22, 2020; letter from Carol Glazer, CEO, 

National Organization on Disability, to Vanessa 

Countryman, Secretary, Commission, dated 

December 9, 2020. 

135See, e.g., CFA Letter at 5; Ideanomics Letter at 

4–5. See also, e.g., letter from Kevin R. Eckert, 

Partner, Task Force X Capital, to Vanessa 

Countryman, Secretary, Commission, dated April 

20, 2021 (urging the inclusion of veterans in the 

definition of Diverse); letter from David A. Morken, 

CEO and Chairman, Bandwidth Inc., to Vanessa 

Countryman, Secretary, Commission, dated April 6, 

2021. One commenter states that the proposal 

would fail to treat similarly situated categories 

alike, and that the proposal’s distinctions are 

arbitrary and capricious. See Alliance for Fair Board 

Recruitment Letter at 53–54. 

136The Exchange also points to commenters who 

argue that the proposal would not promote diversity 

because, for example, it would not prohibit 

homogenous boards, and Diverse directors would 

bring similar perspectives to those of white male 

board members. See Nasdaq Response Letter II at 

10–11. The Exchange states that companies are free 

to consider additional diverse attributes when 

identifying director nominees (e.g., nationality, 

disability, veteran status) and are free to disclose 

information relating to diverse attributes beyond 

those highlighted in the proposal. See id. at 11. 

137See id. at 14. 

138See id. The Exchange also encourages 

companies to disclose board diversity metrics 

beyond those categories identified in the proposal, 

to the extent a company considers it material to its 

investors’ voting and investment decisions. See id. 

other studies on the effects of changes 

in board composition on company 

performance and share value. And they 

may apply those conclusions to their 

own circumstances. 

The Board Diversity Proposal is thus 

distinguishable from the board diversity 

mandates described above. Moreover, 

the Exchange’s proposal would mitigate 

concerns regarding unequal access to 

information that may currently exist 

between certain (likely larger and more 

resourceful) investors who could obtain 

board diversity information and other 

(likely smaller) investors who may not 

be able to do the same. And, because the 

Board Diversity Proposal would not 

mandate any particular board 

composition, companies that choose to 

meet the diversity objectives are likely 

to be the ones who stand to benefit the 

most, or incur the least cost. Those 

companies which view the diversity 

objectives themselves as challenging are 

likely to choose to explain rather than 

incur the costs to them of meeting the 

objectives, and those companies for 

whom explaining would be challenging 

will have the option to list on a different 

exchange. For these reasons, the costs of 

the Board Diversity Proposal are likely 

to be relatively limited as compared to 

those regulatory regimes that have 

mandated board diversity and provided 

neither the option to explain or to optout of the regimes by listing elsewhere. 

In light of the disclosure benefits that 

the Board Diversity Proposal would 

provide, and given that the studies of 

the effects of board diversity are 

generally inconclusive and the costs of 

the proposal are likely to be 

comparatively limited, the Commission 

finds that the Board Diversity Proposal 

is consistent with the requirements of 

the Act. 

C. Applicability of the Board Diversity 

Rules 

1. Definition of Diverse 

In the Board Diversity Proposal, the 

Exchange states that current reporting of 

board-level diversity statistics is 

unreliable and unusable to investors 

and points to inconsistencies in the 

definitions of diversity characteristics 

across companies.128 It notes that a 

transparent, consistent definition of 

Diverse would provide stakeholders 

with a better understanding of a 

company’s current board composition 

and philosophy regarding diversity if 

the company does not meet the 

proposed diversity objectives.129 In 

addition, the Exchange believes that 

having a broader definition of ‘‘Diverse’’ 

would permit inconsistent, noncomparable disclosures, whereas a 

narrower definition of ‘‘Diverse’’ 

focused on race, ethnicity, sexual 

orientation, and gender identity will 

promote the public interest by 

improving transparency and 

comparability.130

Some commenters support the 

proposed definition of ‘‘Diverse’’ 

because it would improve the 

transparency, consistency, and 

comparability of disclosures across 

companies, whereas a broader definition 

would maintain the status quo of 

inconsistent, non-comparable data.131

One commenter points out that the 

proposal would not prevent companies 

from considering other attributes 

beyond the proposed definition of 

‘‘Diverse,’’ such as veteran or disability 

status.132 By contrast, other commenters 

object to the proposed definition of 

‘‘Diverse’’ as narrow and superficial.133

Moreover, some commenters request 

that the Exchange expand the proposed 

definition of ‘‘Diverse’’ to include 

individuals with disabilities,134

veterans, or others who are not typically 

well-represented at the board level.135

In response to comments,136 the 

Exchange reiterates that the proposed 

definition of ‘‘Diverse’’ is suitable to 

improve transparency and 

comparability of disclosures across 

companies.137 The Exchange also states 

that companies are not precluded from 

using a broader definition of diversity, 

including persons with disabilities and 

other categories such as veteran status 

or age, provided that these companies 

disclose this under proposed Rule 

5605(f)(3).138

The proposal would facilitate 

comparable board diversity disclosures 

by Nasdaq-listed companies, which 

would lead to more efficient collection 

and use of the information by investors. 

In connection with facilitating 

comparable board diversity disclosures 

and for the reasons discussed below, the 

Exchange’s proposed definition of 


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139See Amendment No. 1 to the Board Diversity 

Proposal at 16–17. 

140Proposed Rule 5605(f)(5) would specify the 

phase-in period for any company newly listing on 

the Exchange (including companies listing through 

an initial public offering, direct listing, transfer 

from another exchange or the over-the-counter 

market, in connection with a spin-off or carve-out 

from a company listed on the Exchange or another 

exchange, or through a merger with an acquisition 

company listed under IM–5101–2 (‘‘acquisition 

company’’)) that was not previously subject to a 

substantially similar requirement of another 

national securities exchange, and any company that 

ceases to be a Foreign Issuer, a Smaller Reporting 

Company, or an Exempt Company. In particular, 

any newly-listed company on the Nasdaq Global 

Select Market (‘‘NGS’’) or Nasdaq Global Market 

(‘‘NGM’’) would be permitted to satisfy the 

requirement to have, or explain why it does not 

have: (i) At least one Diverse director by the later 

of (a) one year from the date of listing or (b) the 

date the company files its proxy statement or 

information statement (or, if the company does not 

file a proxy, its Form 10–K or 20–F) for the 

company’s first annual meeting of shareholders 

subsequent to the company’s listing; and (ii) at least 

two Diverse directors by the later of (a) Two years 

from the date of listing or (b) the date the company 

files its proxy statement or information statement 

(or, if the company does not file a proxy, its Form 

10–K or 20–F) for the company’s second annual 

meeting of shareholders subsequent to the 

company’s listing. See proposed Rule 5605(f)(5)(A). 

In addition, any newly-listed company on the 

Nasdaq Capital Market (‘‘NCM’’) would be 

permitted to satisfy the requirement to have, or 

explain why it does not have, at least two Diverse 

directors by the later of: (i) Two years from the date 

of listing; or (ii) the date the company files its proxy 

statement or information statement (or, if the 

company does not file a proxy, its Form 10–K or 

20–F) for the company’s second annual meeting of 

shareholders subsequent to the company’s listing. 

See proposed Rule 5605(f)(5)(B). Moreover, any 

newly listed Company with a Smaller Board would 

be permitted to satisfy the requirement to have, or 

explain why it does not have, at least one Diverse 

director by the later of: (i) Two years from the date 

of listing, or (ii) the date the company files its proxy 

statement or information statement (or, if the 

company does not file a proxy, its Form 10–K or 

20–F) for the company’s second annual meeting of 

shareholders subsequent to the company’s listing. 

See proposed Rule 5605(f)(5)(D). Any company that 

ceases to be a Foreign Issuer, Smaller Reporting 

Company, or Exempt Company would be permitted 

to satisfy the requirements of proposed Rule 5605(f) 

by the later of: (i) One year from the date that the 

company no longer qualifies as a Foreign Issuer, 

Smaller Reporting Company, or Exempt Company; 

or (ii) the date the company files its proxy statement 

or information statement (or, if the company does 

not file a proxy, its Form 10–K or 20–F) for the 

company’s first annual meeting of shareholders 

subsequent to such event. See proposed Rule 

5605(f)(5)(C). 

141Proposed Rule 5605(f)(7) would specify the 

transition period for the implementation of 

proposed Rule 5605(f). As proposed, each company 

listed on the Exchange (including a Company with 

a Smaller Board) would be required to have, or 

explain why it does not have, at least one Diverse 

director by the later of: (i) Two calendar years after 

the approval date of the proposal (‘‘First Effective 

Date’’); or (ii) the date the company files its proxy 

statement or information statement (or, if the 

company does not file a proxy, its Form 10–K or 

20–F) for the company’s annual shareholders 

meeting during the calendar year of the First 

Effective Date. See proposed Rule 5605(f)(7)(A). In 

addition, each company listed on NGS or NGM 

must have, or explain why it does not have, at least 

two Diverse directors by the later of: (i) Four 

calendar years after the approval date of the 

proposal (‘‘Second NGS/NGM Effective Date’’); or 

(ii) the date the company files its proxy statement 

or information statement (or, if the company does 

not file a proxy, its Form 10–K or 20–F) for the 

company’s annual shareholders meeting during the 

calendar year of the Second NGS/NGM Effective 

Date. See proposed Rule 5605(f)(7)(B). Moreover, 

each company listed on NCM must have, or explain 

why it does not have, at least two Diverse directors 

by the later of: (i) Five calendar years after the 

approval date of the proposal (‘‘Second NCM 

Effective Date’’); or (ii) the date the company files 

its proxy statement or information statement (or, if 

the company does not file a proxy, its Form 10–K 

or 20–F) for the company’s annual shareholders 

meeting during the calendar year of the Second 

NCM Effective Date. See proposed Rule 

5605(f)(7)(C). 142See Amendment No. 1 to the Board Diversity 

Proposal at Section 3.b.II.D. According to the 

Exchange, the proposed transition and phase-in 

periods are intended to provide newly listed public 

companies with additional time to meet the 

diversity objectives of proposed Rule 5605(f)(2), as 

newly listed public companies may have unique 

governance structures, such as staggered boards or 

director seats held by venture capital firms, that 

require additional timing considerations when 

adjusting the board’s composition. See id. at 79. The 

Exchange further states that the proposed transition 

and phase-in periods are intended to provide 

additional flexibility to companies listed on NCM, 

as such companies are typically smaller and may 

face additional challenges and resource constraints 

when identifying additional director nominees who 

self-identify as Diverse. See id. The Exchange also 

states that its proposed phase-in periods are 

consistent with the phase-in periods it provides to 

companies for other board composition 

requirements. See id. at 81. See also, e.g., Rules 

5615(b)(1), 5615(b)(3), and 5620. 

143See Amendment No. 1 to the Board Diversity 

Proposal at 83. 

144The definition of Underrepresented Individual 

is based on the United Nations Declaration on the 

Rights of Persons Belonging to National or Ethnic, 

Religious and Linguistic Minorities and the United 

Nations Declaration on the Rights of Indigenous 

Peoples. See id. at 69, 140–41. 

145See id. at 81–82. 

146See id. at 84–85. 

147See id. at 86. 

‘‘Diverse’’ is not unreasonable. It is not 

unreasonable for the Exchange to 

propose a definition of 

‘‘Underrepresented Minority’’ that is 

consistent with the EEO–1 categories 

reported to the EEOC because, among 

other reasons, companies may already 

be familiar with the EEO–1 categories, 

which could promote efficiency for 

companies in complying with the 

proposed rules. It is also not 

unreasonable for the Exchange to 

include LGBTQ+ in its proposed 

definition of ‘‘Diverse.’’ Moreover, as 

stated by the Exchange, companies are 

not precluded from considering director 

characteristics that do not fall within 

the proposed definition of ‘‘Diverse’’ 

and providing the disclosures under 

proposed Rule 5605(f)(3) if the company 

does not satisfy the proposed board 

diversity objectives. 

2. Flexibility for Certain Companies 

In the Board Diversity Proposal, the 

Exchange recognizes that the operations, 

size, and current board composition of 

each Nasdaq-listed company are unique, 

and states that it endeavors to provide 

a disclosure-based, business-driven 

framework to enhance board diversity 

that balances the need for flexibility 

with each company’s particular 

circumstances.139 According to the 

Exchange, the proposed disclosure 

framework and phase-in 140 and 

transition periods 141 under Rule 5605(f) 

recognize the differences (e.g., in 

demographics or resources) among 

different types of companies and would 

not unfairly discriminate among 

companies.142 The Exchange states that 

the definition of Foreign Issuer is 

designed to recognize that companies 

that are not Foreign Private Issuers but 

are headquartered outside of the United 

States are foreign companies, 

notwithstanding the fact that they file 

domestic Commission reports, and is 

designed to exclude companies that are 

domiciled in a foreign jurisdiction 

without having a physical presence in 

that country.143 Further, according to 

the Exchange, because the EEOC 

categories of race and ethnicity may not 

extend to all countries globally since 

each country has its own unique 

demographic composition, and because 

on average women tend to be 

underrepresented in boardrooms across 

the globe, proposed Rule 5605(f)(2)(B) 

would allow Foreign Issuers to meet the 

diversity objectives by having one 

Female director and one 

Underrepresented Individual 144 (rather 

than Underrepresented Minority) or 

LGBTQ+ director, or two Female 

directors.145 With respect to Smaller 

Reporting Companies, the Exchange 

states that, because these companies 

may not have the resources necessary to 

compensate an additional director or 

engage a search firm to search outside 

of directors’ networks, it proposes to 

provide these companies with 

additional flexibility in their 

approach.146 Moreover, in providing 

additional flexibility to Companies with 

a Smaller Board, the Exchange states 

that these companies may face similar 

resource constraints to those of Smaller 

Reporting Companies, but not all 

Companies with a Smaller Board are 

Smaller Reporting Companies, and 

therefore the alternative diversity 

objective that would be provided to 

Smaller Reporting Companies may not 

be available to them.147 The Exchange 

further states that Companies with a 

Smaller Board may be 

disproportionately impacted if they plan 

to satisfy proposed Rule 5605(f)(2) by 


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148See id. The Exchange also states that proposed 

Rule 5605(f)(2)(D) would avoid complexity for 

Companies with a Smaller Board that attempt to 

satisfy the diversity objectives by adding a Diverse 

director to their board, and prevent such companies 

from thereby being subject to a higher threshold 

(i.e., that of proposed Rule 5605(f)(2)(A), (B), or (C)) 

as a result. See id. at 86–87. 

149Proposed Rule 5605(f)(4) would exempt the 

following types of companies from the requirements 

of proposed Rule 5605(f) (‘‘Exempt Companies’’): 

(1) Acquisition companies; (2) asset-backed issuers 

and other passive issuers (as set forth in Rule 

5615(a)(1)); (3) cooperatives (as set forth in Rule 

5615(a)(2)); (4) limited partnerships (as set forth in 

Rule 5615(a)(4)); (5) management investment 

companies (as set forth in Rule 5615(a)(5)); (6) 

issuers of non-voting preferred securities, debt 

securities, and derivative securities (as set forth in 

Rule 5615(a)(6)) that do not have equity securities 

listed on the Exchange; and (7) issuers of securities 

listed under the Rule 5700 series. 

150See Amendment No. 1 to the Board Diversity 

Proposal at 90, 150. The Exchange states that, 

although it is exempting acquisition companies 

from the requirements of proposed Rule 5605(f), 

upon such a company’s completion of a business 

combination with an operating company, the postbusiness combination entity would be provided the 

same phase-in period as other newly listed 

companies to satisfy the requirements of proposed 

Rule 5605(f). See id. at 90–91, 151. 

151See id. at 115–16. The Exchange recognizes 

that some Foreign Issuers may have their principal 

executive offices located outside of the U.S. and in 

jurisdictions that may impose laws limiting or 

prohibiting self-identification questionnaires. See 

id. at 68. The Exchange also states that the proposed 

definition of Underrepresented Minority may be 

inapplicable to a Foreign Issuer and make the Board 

Diversity Matrix data less relevant for such 

companies and not useful for investors. See id. 

152See id. at 117–18. 

153See AllianceBernstein Letter at 2. See also, 

e.g., Stardust Letter at 2; letter from Gary A. 

LaBranche, FASAE, CAE, President & CEO, 

National Investor Relations Institute, to Vanessa 

Countryman, Secretary, Commission, dated 

December 30, 2020, at 4. 

154See Guzik Letter at 1, 7–10. 155See Alliance for Fair Board Recruitment Letter 

at 47–49. 156See Guzik Letter at 8. 157See Project on Fair Representation Letter at 6. 158See Nasdaq Response Letter II at 4. 159See id. The Exchange also states that 

companies are not precluded from striving to 

achieve higher or lower diversity objectives. See id. 160Exchanges currently provide flexibilities to 

certain issuers under their listing standards. See, 

e.g., Nasdaq Rule 5615(a)(3) (providing certain 

flexibility to foreign private issuers); Nasdaq Rule 

5605(d)(5) (providing certain flexibility to smaller 

reporting companies); NYSE Listed Company 

Manual Section 303A.00 (providing certain 

flexibility to foreign private issuers and smaller 

reporting companies). 

adding additional directors, which may 

impose additional costs in the form of 

director compensation and D&O 

insurance.148 With respect to Exempt 

Companies,149 the Exchange states that 

they do not have boards, do not list 

equity securities, list only securities 

with no voting rights towards the 

election of directors, or are not 

operating companies, and that holders 

of the securities they issue do not expect 

to have a say in the composition of their 

boards.150 And the Exchange states that 

proposed Rule 5606 would provide 

appropriate flexibility for Foreign 

Issuers 151 and exceptions for certain 

types of Nasdaq-listed companies.152

Some commenters express support for 

the proposed additional flexibility for 

foreign or smaller companies, or ‘‘other 

groups of issuers that are more 

constrained for valid reasons.’’ 153

Another commenter contends, however, 

that the proposal is inconsistent with 

Section 6(b)(5) of the Act because it 

appears to be designed to permit unfair 

discrimination between issuers and 

impose burdens on competition that are 

not necessary or appropriate in 

furtherance of the applicable provisions 

of the Act.154 One commenter further 

asserts that the proposal is inconsistent 

with Section 6(b)(5) of the Act because 

it unfairly discriminates among issuers 

by giving foreign issuers flexibility that 

is not available to domestic issuers.155

One commenter also argues that the 

proposal would unnecessarily burden 

competition and unfairly discriminate 

between issuers who meet the proposed 

diversity objectives and those who do 

not,156 and one commenter argues that 

the proposal would burden competition 

between exempt and non-exempt 

companies.157

In response to comments, the 

Exchange states that the Board Diversity 

Proposal would provide companies with 

a flexible, attainable approach to 

achieving a reasonable objective that is 

not overly burdensome or coercive.158

The Exchange also states that the Board 

Diversity Proposal would align 

investors’ demands for increased 

diversity with companies’ needs for a 

flexible approach that accommodates 

each company’s unique 

circumstances.159

The Board Diversity Proposal is 

consistent with Sections 6(b)(5) and 

6(b)(8) of the Act. As discussed below, 

the proposal is not designed to permit 

unfair discrimination between issuers 

and would not impose a burden on 

competition between issuers that is not 

necessary or appropriate in furtherance 

of the purposes of the Act.160 As an 

initial matter, even though the Board 

Diversity Proposal would establish 

different diversity objectives and 

disclosures for different types of 

Nasdaq-listed companies, it would not 

mandate any particular board 

composition for Nasdaq-listed 

companies, companies that do not meet 

the applicable diversity objectives 

would only need to explain their 

reason(s) for not meeting the objectives 

and would have substantial flexibility in 

crafting such an explanation, and 

directors would not be required to selfidentify their Diverse characteristics for 

purposes of the Board Diversity Matrix. 

Moreover, it is not unreasonable for 

the Exchange, in crafting board diversity 

disclosures, to recognize that the 

proposed definition of 

‘‘Underrepresented Minority’’ for 

domestic companies may not be as 

effective in identifying 

underrepresented board members in 

foreign countries that have differing 

ethnic and racial compositions, and may 

therefore result in disclosures that are 

less useful for investors who seek board 

diversity information for Foreign 

Issuers. It is therefore not unreasonable 

for the Exchange to require Foreign 

Issuers to provide disclosures relating to 

underrepresented individuals based on 

national, racial, ethnic, indigenous, 

cultural, religious, or linguistic identity 

in the country of the issuer’s principal 

executive offices. Similarly, to the 

extent Foreign Issuers choose to meet 

the proposed diversity objectives, it is 

not unreasonable for the Exchange to 

take into account the differing 

demographic compositions of foreign 

countries and to provide Foreign Issuers 

flexibility in recognition of the different 

circumstances associated with Foreign 

Issuers hiring Diverse directors. 

Moreover, investors would still have 

access to a Foreign Issuer’s Board 

Diversity Matrix and any disclosures 

explaining why it does not meet the 

applicable diversity objective, and this 

information may still be important to 

investors’ investment and voting 

decisions notwithstanding the flexibility 

provided to Foreign Issuers. 

Accordingly, it is not unfairly 

discriminatory, and does not impose an 

unnecessary or inappropriate burden on 

competition, for the Exchange to 

provide this flexibility to Foreign 

Issuers. 

In addition, it is not unreasonable for 

the Exchange to recognize the unique 

challenges (including potential resource 

constraints) faced by Smaller Reporting 

Companies and Companies with a 

Smaller Board in meeting the proposed 

diversity objectives and to provide more 

flexibility to these companies to the 

extent they choose to meet the diversity 

objectives (i.e., two Diverse directors, 

which could be satisfied with two 

Female directors, for a Smaller 

Reporting Company and one Diverse 

director for a Company with a Smaller 

Board). And, as with Foreign Issuers, 

investors would still have access to the 

Board Diversity Matrix from Smaller 

Reporting Companies and Companies 

with a Smaller Board, as well as any 

disclosures explaining why such 

companies do not meet their applicable 

board diversity objectives, and this 


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161See infra Section II.D. 

162The Exchange currently exempts certain types 

of issuers from certain corporate governance 

requirements. See Nasdaq Rule 5615. 

163See Amendment No. 1 to the Board Diversity 

Proposal at 159 (stating that, while the time and 

economic burden may vary based on a company’s 

board size, the Exchange does not believe that there 

is any significant burden associated with gathering, 

preparing, and reporting this data). 

164See id. at 159–60. 

165See id. at 160–61. 

166See id. at 161. 

167See id. 

168See id. at 161–62 (also stating that the Board 

Recruiting Service Proposal would reduce costs for 

companies that do not currently meet the separately 

proposed diversity objectives, that the Exchange has 

published FAQs on its Listing Center to provide 

guidance to companies on the application of the 

proposed rules in the Board Diversity Proposal, and 

that the Exchange will establish a dedicated 

mailbox for companies and their counsel to email 

additional questions to the Exchange regarding the 

application of such proposed rules). 

169See id. at 162. 

170Some commenters point out that the Board 

Diversity Proposal would require disclosure based 

on the same categories that companies already use 

to report workforce diversity data to the EEOC on 

the EEO–1 report. See, e.g., Morningstar Letter at 

1–2; Fairfax Letter at 7–8; Ideanomics Letter at 4; 

Goodman and Olson Letter at 2. 

171See, e.g., Olshan Letter at 3–4; CFA Letter at 

5; Fairfax Letter at 7–8; Stardust Letter at 1–2; TIAA 

Letter at 3; Soundboard Letter at 2–3. See also letter 

from Theresa Whitmarsh, Executive Director, 

Washington State Investment Board, to Vanessa A. 

Countryman, Secretary, Commission, dated 

December 23, 2020 (‘‘Washington State Investment 

Board Letter’’), at 2. 

172See Akin Gump Letter at 5 (also stating that 

boards of directors of Nasdaq-listed companies will 

not be confronted with any undue hardship, other 

than the ordinary course onboarding hurdles or 

drafting of requisite disclosure). 

173See, e.g., letter from Rosie Bichard and Patricia 

Rodriguez Christian, Co-Presidents, WomenExecs 

on Boards, to Jay Clayton, Chairman, Commission, 

dated January 4, 2021 (‘‘WomenExecs Letter’’); Ariel 

Letter at 1. See also Goodman and Olson Letter at 

2–3. 

174See, e.g., CEI Letter at 4–5; Quigley Letter; IBC 

Letter at 1–4; letter from Matthew Glen dated 

December 31, 2020 (noting the need for additional 

services to seek Diverse candidates). 

175See Toomey Letter at 1, 5–6. See also, e.g., 

Alliance for Fair Board Recruitment Letter at 31– 

32 (stating that failure to cure a deficiency would 

result in a staff delisting determination, that the 

proposal would create a target for activist 

divestment campaigns or shareholder lawsuits 

alleging misrepresentations and breach of fiduciary 

duties, and that companies will need to spend 

limited resources to hire communications 

consultants and attorneys to evaluate the marketing 

and legal risks of providing an explanation for not 

having the applicable number of Diverse directors); 

Guzik Letter at 8 (expressing concern regarding 

pressure from activist groups, as well as litigation, 

for issuers that are unwilling or unable to meet the 

proposed diversity objectives); letter from Art Ally, 

President and CEO, Timothy Plan, dated March 25, 

2021 (‘‘Timothy Plan Letter’’), at 1–2 (stating that 

the proposal may subject certain firms to 

information may still be important to 

investors’ investment and voting 

decisions even though these companies 

have more flexible diversity objectives. 

Accordingly, it is not unfairly 

discriminatory, and does not impose an 

unnecessary or inappropriate burden on 

competition for the Exchange to provide 

more flexible diversity objectives for 

Smaller Reporting Companies and 

Companies with a Smaller Board. 

Moreover, the Board Diversity 

Proposal would not unfairly 

discriminate against companies that 

make disclosures under proposed Rule 

5605(f)(3) or impose an unnecessary or 

inappropriate burden on competition 

between companies that choose to meet 

the diversity objectives and companies 

that make the disclosures under 

proposed Rule 5605(f)(3). Specifically, 

as discussed below, the Board Diversity 

Proposal is designed to not unduly 

burden Nasdaq-listed companies and 

would provide companies flexibility in 

formulating an explanation for not 

meeting the diversity objectives,161

thereby minimizing any potential 

burdens on competition. In addition, it 

is not unreasonable, and mitigates the 

impact of different circumstances on 

how companies respond to the proposal, 

to only require companies that do not 

meet the proposed diversity objectives 

to disclose why they have not met such 

objectives, rather than to require all 

Nasdaq-listed companies (including 

those that already have Diverse directors 

on their boards sufficient to satisfy the 

objectives) to more generally disclose 

their approaches to board diversity. In 

addition, the proposal would not 

mandate any particular board 

composition, and there is competition 

among the exchanges for listings. A 

company may choose to meet the 

proposed diversity objectives or explain 

its reasons for not doing so, or the 

company may transfer its listing to 

another exchange if it does not wish to 

comply with the proposed listing rules. 

Finally, the proposal would not 

unfairly discriminate against companies 

that are not exempt from the proposal or 

impose an unnecessary or inappropriate 

burden on competition between Exempt 

Companies and companies that are not 

exempt. It is not unreasonable for the 

Exchange to recognize the differences 

between operating companies that issue 

equity securities with voting rights that 

are listed on the Exchange and Exempt 

Companies.162

D. Burdens Associated With Complying 

With the Board Diversity Rules and 

Other Economic Impacts Associated 

With the Board Diversity Rules 

In the Board Diversity Proposal, the 

Exchange states that collecting and 

disclosing the statistical data under 

proposed Rule 5606 would impose a 

minimal time and economic burden on 

listed companies,163 and any such 

burden would be counterbalanced by 

the benefits that the information would 

provide to a company’s investors.164

The Exchange also argues that 

because proposed Rule 5605(f) would 

allow a company to explain why it does 

not meet the proposed diversity 

objectives, it would mitigate any 

burdens on companies for which 

meeting those objectives is not cost 

effective, appropriate, feasible, or 

desirable.165 Moreover, the Exchange 

states that the costs of identifying 

director candidates and total annual 

director compensation can range 

widely.166 The Exchange states, 

however, that most, if not all, of these 

costs would be borne in the search for 

new directors regardless of the proposed 

rule.167 The Exchange also notes that 

while the proposal may lead some 

companies to search for director 

candidates outside of already 

established networks, the incremental 

costs of doing so would be tied directly 

to the benefits of a broader search.168

Moreover, the Exchange states, the 

proposed compliance periods would 

allow companies to avoid incurring 

immediate costs, and the proposed 

flexibilities for certain types of 

companies would reduce their 

compliance burden.169

Some commenters believe that the 

Board Diversity Proposal would not be 

burdensome because companies are 

already familiar with the type of 

disclosures required,170 disclosures are 

required on an aggregate basis, and the 

disclosures are based on voluntary selfidentification.171 One commenter 

asserts that the proposal would not be 

burdensome, as companies could 

expand the size of their boards to add 

Diverse directors instead of replacing 

existing directors or could simply 

explain why they have not met the 

proposed diversity objectives.172 Some 

commenters also state that finding 

qualified Diverse directors would not be 

unduly difficult.173

Other commenters express concern 

with the economic impacts of proposed 

Rule 5605(f), however.174 One argues 

that the proposal could harm economic 

growth by imposing costs on public 

corporations, discouraging private 

corporations from going public, and 

enabling certain groups to initiate 

pressure campaigns against corporations 

with non-Diverse boards; the same 

commenter expresses concern that the 

Exchange has not undertaken a serious 

effort to quantify the proposal’s costs 

and benefits.175


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harassment, including legal threats); letter from 

Tom Quaadman, Executive Vice President, U.S. 

Chamber of Commerce’s Center for Capital Markets 

Competitiveness, to Vanessa Countryman, 

Secretary, Commission, dated January 4, 2021, at 2 

(expressing support for the Board Diversity 

Proposal while suggesting ongoing careful 

assessment of how the proposal could affect 

Emerging Growth Companies, as well as the 

potential effect that the proposed new listing 

standards could have on the future of initial public 

offerings). 

176See Nasdaq Response Letter II at 28–29. 

177See id. at 29. 

178See id. The Exchange specifically states that, 

among the many elements companies consider 

when becoming public, board composition is 

growing in importance among pre-public company 

stakeholders. See id. (noting Goldman Sach’s new 

standard for taking companies public (i.e., the 

company must have at least one diverse board 

member), and citing Washington State Investment 

Board Letter at 2, which states that many private 

equity general partners are already moving toward 

‘‘new and improved’’ diversity standards, and 

Institutional Limited Partners Association Letter at 

2, which states that, given the frequency of private 

equity and venture-backed companies exiting 

through an IPO, the proposal will likely result in 

positive movement on board diversity of portfolio 

companies owned by private funds). The Exchange 

also states that Amendment No. 1 to the Board 

Diversity Proposal would provide a newly listed 

company with a reasonable amount of time to 

publish its board disclosure and to have Diverse 

directors in alignment with the proposed diversity 

objectives after going public. See id. 

179See id. at 30. 

180See id. 

181See id. The Exchange states that it has taken 

multiple steps to mitigate the potential costs of the 

proposal (e.g., proposing to offer the complimentary 

recruiting service, proposing the alternative of an 

explanation if a company chooses to not meet the 

proposed diversity objectives). See id. 182See 15 U.S.C. 78c(f). See also Section II.A.2. 

(discussing the efficiencies that could result from 

the Board Diversity Proposal). 183To account for the fact that not every company 

files a proxy statement, the Exchange amended the 

Board Diversity Proposal in Amendment No. 1 to 

allow such companies to provide the disclosures in 

a Form 10–K or 20–F. 184 In response to comments, the Exchange 

amended the Board Diversity Proposal to provide a 

grace period under proposed Rule 5605(f)(6)(B) for 

a company that satisfied the objectives of proposed 

Rule 5605(f)(2) but ceases to meet the objectives due 

to a vacancy on its board of directors, to provide 

additional time for newly listed companies to 

satisfy the requirements of proposed Rule 5605(f) 

and to better align the phase-in and transition 

periods with a company’s proxy season. See also 

letter from Stephen J. Kastenberg, Ballard Spahr 

LLP, to Vanessa Countryman, Secretary, 

Commission, dated January 14, 2021 (‘‘Ballard 

Spahr Letter’’), at 1–2 (submitted on behalf of the 

Exchange) (stating that the Exchange has received 

requests to: allow additional time for companies 

listed on the NGS, NGM, and NCM to comply with 

the diversity objectives of proposed Rule 5605(f)(2); 

provide a ‘‘cure’’ period for a listed company that 

does not comply with the diversity objectives of 

proposed Rule 5605(f)(2) as a result of an 

unanticipated departure of a Diverse director; and 

amend the effective date of the proposed rules to 

better align disclosure requirements with annual 

meetings and proxy requirements). 

185The Exchange proposes to provide certain 

Nasdaq-listed companies with one-year of 

complimentary access for two users to a board 

recruiting service, which would provide access to 

a network of board-ready diverse candidates, 

allowing companies to identify and evaluate 

Diverse board candidates. See proposed IM–5900– 

9; Amendment No. 1 to the Board Recruiting 

Service Proposal at 10–11. According to the 

Exchange, this service has an approximate retail 

value of $10,000 per year. See proposed IM–5900– 

9. As proposed, until December 1, 2022, any 

Eligible Company that requests access to this 

service through the Nasdaq Listing Center will 

receive complimentary access for one year from the 

initiation of the service. See id. 

In response to such comments, the 

Exchange states that companies may 

decide where to list and that listings 

contracts and fees do not impede issuers 

from switching listing markets.176 The 

Exchange also asserts that many longterm, newer, and potential public 

companies strongly support and value 

the objectives of the proposal and may 

affirm their choice or choose to list on 

Nasdaq because of it.177 The Exchange 

further contends that private companies 

recognize the value of board diversity 

for public companies and would not 

have any misgivings about going public 

as a result of the proposal.178 The 

Exchange additionally states that the 

proposal’s framework would allow 

companies with non-Diverse boards to 

simply explain their approach, which 

would limit pressure campaigns.179

Further, the Exchange states that it has 

carefully considered the potential costs 

on listed companies (and those 

considering listing), including the costs 

of retaining a director search firm to 

conduct the search for new or 

replacement directors, the time 

employees spend conducting the search 

and completing and providing the 

required disclosures, and the potential 

disruption to the board from these 

activities.180 The Exchange states, 

however, because existing, new, and 

potential public companies would 

experience those costs in vastly 

different ways and combinations, those 

costs cannot be quantified with 

meaningful certainty.181

In approving the Board Diversity 

Proposal, the Commission has 

considered the proposal’s impact on 

efficiency, competition, and capital 

formation and finds that it would not 

have a material impact on efficiency, 

that it is reasonably designed not to 

unduly burden Nasdaq-listed 

companies, and that it would not 

unduly deter capital formation (e.g., by 

affecting companies’ decisions to go 

public and list on the Exchange).182 As 

proposed, companies that choose not to 

meet the diversity objectives would not 

be required to meet those objectives. 

Any company that neither wishes to 

meet the diversity objectives nor 

disclose its reasons for not doing so may 

transfer its listing to a competing listing 

exchange. Moreover, the Board Diversity 

Proposal would provide directors with 

the option to not self-identify. 

Further, various aspects of the two 

proposals would mitigate any burdens 

associated with compliance, as well as 

any related impact on capital formation. 

In particular, the Board Diversity 

Proposal would provide: Flexibility in 

formulating an explanation for not 

meeting the diversity objectives; 

flexibility for Foreign Issuers, Smaller 

Reporting Companies, and Companies 

with a Smaller Board; Flexibility with 

respect to the location of the required 

disclosures (i.e., in the company’s proxy 

statement or information statement (or if 

the company does not file a proxy, in its 

Form 10–K or 20–F),183 or on the 

company’s website); phase-in periods 

for companies newly listing on the 

Exchange, companies switching listing 

tiers on the Exchange, and companies 

that cease to be Foreign Issuers, Smaller 

Reporting Companies, or Exempt 

Companies to comply with the proposed 

rules; a cure period for a company that 

previously satisfied proposed Rule 

5605(f) but subsequently ceases to meet 

the diversity objective due to a vacancy 

on its board; and transition periods for 

companies to comply with the proposals 

after they are approved.184 Additionally, 

the Board Recruiting Service Proposal— 

which is separately approved by this 

order—would offer a one-year 

complimentary board recruiting service 

that would mitigate costs associated 

with hiring additional Diverse 

directors.185 Moreover, the Board 

Diversity Proposal would provide 

reasonable time periods for companies 

that fail to maintain compliance to 

regain compliance and avoid being 

delisted from the Exchange: A company 

that does not comply with proposed 

Rule 5605(f)(2) would be provided until 

the later of its next annual shareholders 

meeting or 180 days from the event that 

caused the deficiency to cure the 

deficiency, and a company that does not 

comply with proposed Rule 5606 would 

have 45 calendar days to submit a plan 

of compliance to the Exchange and 

upon review of such plan, Exchange 

staff may provide the company with up 

to 180 days to regain compliance. 

Finally, the proposals may promote 

competition for listings among 

exchanges by allowing the Exchange to 

update its disclosure rules and related 

listing services in a way that better 

attracts and retains the listings of 

companies that prefer to be listed on an 

exchange that provides investors with 

the information required by the Board 

Diversity Proposal. While some 

companies that do not prefer the Board 

Diversity Proposal’s required 


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186See Amendment No. 1 to the Board Diversity 

Proposal at Section 3.b.II.E. 

187See id. at 155–56. The Exchange recognizes 

that several states have enacted or proposed 

legislation relating to board diversity and that 

Congress is considering legislation to require 

Commission-registered companies to provide board 

diversity statistics and disclose whether they have 

a board diversity policy. See id. at 16. 

188See id. at 156. 

189See id. at 53. 

190See id. at 58. 

191See id. at 58–59. Various provisions under the 

federal securities laws may require disclosure of 

third party compensation arrangements with or 

payments to nominees and/or board members. See 

Securities Exchange Act Release No. 78223 (July 1, 

2016), 81 FR 44400, 44403 (July 7, 2016). 

192See Amendment No. 1 to the Board Diversity 

Proposal at 60. 

193See, e.g., Timothy Plan Letter at 1–2 (also 

supporting Toomey Letter); CEI Letter at 1; Toomey 

Letter at 4; Heritage Foundation Letter at 3–5, 17– 

18; Guess Letter at 1. Another commenter argues 

that the Board Diversity Proposal raises concerns 

about increasing costs and parallels to socialism. 

See letter from Henryk A Kowalczyk dated January 

6, 2021 (‘‘Kowalczyk Letter’’) (reproducing a 

December 18, 2020 article published in Medium 

titled ‘‘Socialists Are Taking Over Wall Street’’). 

194See Alliance for Fair Board Recruitment Letter 

at 49–50. 

195See, e.g., Guzik Letter at 1; Alliance for Fair 

Board Recruitment Letter at 49–50; Heritage 

Foundation Letter at 2; Project on Fair 

Representation Letter at 7–11; letter from 

Christopher A. Iacovella, Chief Executive Officer, 

American Securities Association, to Vanessa 

Countryman, Secretary, Commission, dated 

December 31, 2020, at 1–2; Publius Letter at 4–5. 

196See Nasdaq Response Letter II at 22. 

197See id. at 23–24. 

198See id. at 24. 

199See id. 

200See id. 

201See id. 

202See, e.g., Nasdaq IM–5250–2 (requiring 

Nasdaq-listed companies to publicly disclose the 

material terms of all agreements and arrangements 

between any director or nominee and any person 

or entity (other than the listed company) relating to 

compensation or other payment in connection with 

that person’s candidacy or service as a director); 

LTSE Rule 14.425(a)(1)(C) (requiring LTSE-listed 

issuers to adopt and publish a policy on the 

company’s approach to diversity and inclusion). 

disclosures may choose to not go public 

and list on the Exchange, or they may 

delist from the Exchange, the proposal 

contains terms to mitigate adverse 

effects. Moreover, some companies may 

shift their listings to the Exchange, or 

may choose to go public on the 

Exchange rather than remain private, in 

response to the Board Diversity 

Proposal’s requirements because of the 

interest shown in comparable and 

consistent board diversity information, 

which could benefit investors by 

increasing the number of publicly listed 

companies. 

E. The Exchange’s Authority for the 

Board Diversity Rules 

Section 6(b)(5) of the Act requires, 

among other things, that the rules of a 

national securities exchange not be 

designed to regulate by virtue of any 

authority conferred by the Act matters 

not related to the purposes of the Act or 

the administration of the exchange. In 

the Board Diversity Proposal, the 

Exchange argues that the proposal is 

related to corporate governance 

standards for listed companies and is 

therefore not designed to regulate by 

virtue of any authority conferred by the 

Act matters not related to the purposes 

of the Act or the administration of the 

Exchange.186 While the Exchange 

recognizes that U.S. states are 

increasingly proposing and adopting 

board diversity requirements, the 

Exchange states that certain of its 

current corporate governance listing 

rules relate to areas that are also 

regulated by states (e.g., quorums, 

shareholder approval of certain 

transactions).187 The Exchange states 

that adopting Exchange rules relating to 

such matters (and the proposed rule 

changes described herein) would ensure 

uniformity of such rules among its listed 

companies.188

The Exchange also states that it can 

establish practices that would assist in 

carrying out its mandate to protect 

investors and remove impediments from 

the market through the Board Diversity 

Proposal.189 The Exchange believes that 

it is within its delegated authority to 

propose listing rules designed to 

enhance transparency, provided that 

they do not conflict with existing 

federal securities laws.190 The Exchange 

states that, for example, it already 

requires its listed companies to publicly 

disclose compensation or other 

payments by third parties to a 

company’s directors or nominees, 

notwithstanding that such disclosure is 

not required by federal securities 

laws.191 The Exchange further states 

that it has designed the proposal to 

avoid a conflict with existing disclosure 

requirements under Regulation S–K and 

to mitigate additional burdens for 

companies by providing them with 

flexibility to provide such disclosure on 

their website, in their proxy statement 

or information statement, or, if a 

company does not file a proxy, in its 

Form 10–K or 20–F, and by not 

requiring companies to adopt a diversity 

policy.192

Some commenters argue that the 

Board Diversity Proposal is 

impermissibly designed to address 

political and social issues and would 

redefine the purpose of businesses in a 

way that is unrelated to traditional 

business purposes (e.g., profitability, 

obligation to shareholders, satisfying 

customers, and treating workers and 

suppliers fairly).193 One commenter also 

asserts that the proposal does not relate 

to any traditional corporate governance 

matter.194 Moreover, some commenters 

argue that the proposal is not within the 

purposes of the Act and exceeds the 

authority of national securities 

exchanges under the Act.195

In response, the Exchange states that 

the Act provides the standards for 

approval of rules proposed by SROs, 

which are different from rulemaking by 

the Commission.196 The Exchange states 

that it is performing its duties as an 

exchange to fashion listing rules that 

promote good corporate governance.197

The Exchange also notes that it is 

expected and required, in its role 

operating an exchange, to develop and 

enforce listing rules that, among other 

things, ‘‘remove impediments to and 

perfect the mechanisms of a free and 

open market’’ and ‘‘protect investors 

and the public interest.’’ 198 With 

respect to the comment that the 

proposal contributes to the 

federalization of corporate governance, 

the Exchange states that it develops 

listing rules regarding corporate 

governance standards to promote 

uniformity among its listed companies, 

even if the same areas are regulated by 

states.199 In addition, the Exchange 

states that companies voluntarily list on 

the Exchange, as a private entity, and 

choose to submit to the Exchange’s 

listing rules.200 Moreover, national 

securities exchanges may adopt 

different approaches.201

The Board Diversity Proposal would 

make consistent and comparable 

information relating to the corporate 

governance of Nasdaq-listed companies 

(i.e., information regarding board 

diversity) widely available on the same 

basis to investors, which would increase 

efficiency for investors that gather and 

use this information. In addition, the 

proposal would not redefine the 

purpose of Nasdaq-listed companies’ 

businesses in a way that is unrelated to 

traditional business purposes, as 

claimed by certain commenters. Rather, 

it could enhance investors’ investment 

and voting decisions and, as discussed 

throughout this order, is consistent with 

Section 6 of the Act, which requires that 

the rules of an exchange be designed to, 

among other things, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and 

protect investors and the public interest. 

Exchanges have historically adopted 

listing rules that require disclosures in 

addition to those required by 

Commission rules.202 National 

securities exchanges may choose to 


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203See 2016 Approval Order, supra note 23. 204See, e.g., letter from Thomas J. Fitton, 

President, Judicial Watch, Inc., to Vanessa 

Countryman, Secretary, Commission, dated 

December 29, 2020 (‘‘Judicial Watch Letter’’), at 5– 

6; Project on Fair Representation Letter at 12–13. 

One commenter argues that the proposal constitutes 

state action, and that even if the proposal of the 

board diversity rules is free from government 

coercion or encouragement, the enforcement of the 

rules is not. See Alliance for Fair Board 

Recruitment Letter at 59–64. 

205See, e.g., letter from Colin Gallagher dated 

January 8, 2021; Heritage Foundation Letter at 12– 

16; letter from Eugene Kelly to Jay Clayton, 

Chairman, Commission, dated December 29, 2020; 

Richter Letter at 3. 

206See, e.g., NLPC Letter at 4–6; Project on Fair 

Representation Letter at 12–15; Judicial Watch 

Letter at 2–7. 

207See Judicial Watch Letter at 3–4. See also, e.g., 

Free Enterprise Project Letter at 2 (arguing that the 

Board Diversity Proposal is impermissibly vague). 

208See Judicial Watch Letter at 3–4. See also 

Alliance for Fair Board Recruitment Letter at 67– 

68. 

209See Judicial Watch Letter at 4. See also 

Alliance for Fair Board Recruitment Letter at 64– 

66 (arguing that the proposal relating to female 

directors would not satisfy heightened scrutiny); 

NLPC Letter at 4–6. 210See, e.g., Richter Letter at 3; NLPC Letter at 5; 

Judicial Watch Letter at 3. 

211See Alliance for Fair Board Recruitment Letter 

at 70–72; Project on Fair Representation Letter at 

15–16. 

212See Nasdaq Response Letter I at 2, 9–13. 

213See id. at 9–10. 

214See id. at 11–12. 

215See id. at 14. 

216See id. at 15. 

217See id. 

218See id. at 15–16. 

219See id. at 17–18. 

220See id. at 18–22. 

221See id. at 22–24. 

222See id. at 24. 

223See id. at 8. 

224See id. 

225See id. at 25. 

226See id. at 25–26. 

227See id. at 27. 

228See id. 

229See id. 

adopt disclosure requirements in their 

listing rules that supplement or overlap 

with disclosure requirements otherwise 

imposed under the federal securities 

laws, and disclosure-related listing 

standards that provide investors with 

information that facilitates informed 

investment and voting decisions 

contribute to the maintenance of fair 

and orderly markets.203 Accordingly, 

the proposal would not cause the 

Exchange to regulate, by virtue of any 

authority conferred by the Act, matters 

not related to the purposes of the Act or 

the administration of the Exchange. 

F. Comments on Constitutional Scrutiny 

of the Board Diversity Proposal 

Some commenters argue that the 

Board Diversity Proposal, if approved by 

the Commission, would constitute 

impermissible government action,204 is 

discriminatory as it is based on sex, 

race, ethnicity, and sexual 

orientation,205 and would require 

Nasdaq-listed companies to 

discriminate in hiring and, if approved, 

would violate the Fifth Amendment to 

the U.S. Constitution.206 According to 

one commenter, all racial 

classifications, both disadvantaging and 

benefitting minorities, are subject to 

strict scrutiny, and the government must 

demonstrate that the racial 

classifications are narrowly tailored to 

further a compelling government 

interest.207 This commenter asserts that 

‘‘Diversity’’ itself and ‘‘outright racial 

balancing’’ are not compelling 

interests.208 In addition, this commenter 

argues that the proposed objective to 

have at least one director who selfidentifies as a female is a gender quota 

that, like the racial quota, if adopted, 

would violate the Fifth Amendment.209

Other commenters argue that the Board 

Diversity Proposal is akin to affirmative 

action or is distinguishable from 

permissible affirmative action plans.210

Finally, some commenters argue that the 

Board Diversity Proposal would violate 

the First Amendment because it would 

require companies to engage in 

compelled disclosure.211

The Exchange states that it is not a 

state actor, and the proposal does not 

constitute state action subject to 

constitutional scrutiny.212 As support, 

the Exchange notes that courts have 

uniformly concluded that SROs like the 

Exchange are not state actors.213 The 

Exchange also argues that the Board 

Diversity Proposal does not satisfy the 

test for determining whether actions are 

fairly attributable to the government 

because there is no Commission rule or 

action requiring or encouraging the 

Exchange to adopt the proposed 

Exchange rules, and the Commission’s 

approval of a private entity’s action does 

not convert private action into state 

action.214

With respect to concerns expressed by 

commenters regarding Equal Protection 

under the Fifth Amendment to the U.S. 

Constitution, the Exchange states that, 

even if it were found to be a state actor, 

the proposal would not mandate any 

particular number of Diverse directors 

and would therefore survive scrutiny.215

The Exchange further notes that 

proposed Rule 5605(f) establishes 

aspirational diversity objectives, and 

proposed Rule 5606 is a disclosure 

requirement for demographic data on all 

directors serving on the boards of 

Nasdaq-listed companies.216 The 

Exchange states that, accordingly, the 

proposal does not impose a burden on 

or confer a benefit to the exclusion of 

others based on a suspect classification, 

and ‘‘rational basis’’ would be the 

appropriate standard of review.217 The 

Exchange also states that the proposal 

reflects several legitimate government 

interests, such as increasing 

transparency about board diversity so 

that investors can make investment 

decisions based on consistent and 

readily accessible data.218

The Exchange also argues that even if 

the proposal triggered heightened 

scrutiny, proposed Rule 5605(f) would 

survive strict scrutiny because it is 

necessary to achieve a compelling state 

interest 219 and is narrowly tailored to 

achieve that interest.220 The Exchange 

further contends that, with respect to 

gender and LGBTQ+ status, proposed 

Rule 5605(f) would satisfy intermediate 

scrutiny because it is necessary to 

achieve an important government 

interest,221 and is substantially related 

to that important interest.222

The Exchange also argues that the 

proposal is not a form of affirmative 

action because proposed Rule 5605(f) 

would allow for explanation as a path 

to compliance.223 Even assuming the 

proposal constitutes affirmative action, 

the Exchange contends, comparable 

programs that do not include mandates 

are lawful.224

With respect to commenters’ concerns 

that the proposal would violate the First 

Amendment because it would require 

companies to engage in compelled 

speech, the Exchange again argues that 

it is not a state actor.225 The Exchange 

also argues that the proposal does not 

result in compelled speech because it 

allows a voluntary association of private 

companies bound together by contract 

to engage in truthful and lawful speech 

on the subject of board diversity.226 The 

Exchange also states that, even if it were 

a state actor and the proposal were 

interpreted as the government requiring 

speech, the particular speech at issue 

would not constitute compelled 

speech.227 According to the Exchange, 

proposed Rule 5606’s disclosures about 

board composition are the kinds of 

disclosures that are routinely 

permitted,228 and the proposed Rule 

5605(f) disclosures containing a 

company’s explanation for not meeting 

the proposed diversity objectives do not 

compel a company to convey any 

specific message.229 Moreover, the 

Exchange states that even if it were a 

state actor and the proposal implicated 

the compelled speech doctrine, the 

proposal would be constitutional in 

light of the substantial body of studies 


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44440 Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices 

230See id. 

231See, e.g., Charles C. Fawcett, IV, Securities 

Exchange Act Release No. 56770, 91 SEC. Docket 

2594 (November 8, 2007); D.L. Cromwell Invs., Inc. 

v. NASD Regulation, Inc., 279 F.3d 155, 162 (2d Cir. 

2002); Desiderio v. National Ass’n of Secs. Dealers, 

Inc., 191 F.3d 198, 206–07 (2d Cir. 1999); Jones v. 

SEC, 115 F.3d 1173, 1183 (4th Cir. 1997); First 

Jersey Secs., Inc. v. Bergen, 605 F.2d 690, 698 (3d 

Cir. 1979). 

232Blum v. Yaretsky, 457 U.S. 991, 1004 (1982). 

See also Desiderio, 191 F.3d at 207 (Commission’s 

approval of FINRA’s Form U–4). 

233 Desiderio, 191 F.3d at 207 (quoting Jackson v. 

Metropolitan Edison Co., 419 U.S. 345, 350 (1974)). 

234See Toomey Letter at 1, 3–4. 

235See Alliance for Fair Board Recruitment at 54– 

56. 

236See Nasdaq Response Letter II at 13. 

237See id. 

238See id. 

239See 2016 Approval Order, supra note 23 at 

44403. 

240See id. 

241See Richter Letter at 2. 

242See Toomey Letter at 4–5. 

243See Nasdaq Response Letter II at 19. 

244See id. 

245See id. at 19–20. 

246See, e.g., Skadden Letter at 3; CFA Letter at 

5; letter from Gary A. LaBranche, President & CEO, 

National Investor Relations Institute, to Vanessa 

Countryman, Secretary, Commission, dated 

December 30, 2020 (‘‘NIRI Letter’’), at 3; Ideanomics 

Letter at 3. 

247See NIRI Letter at 3. 

248See, e.g., Fairfax Letter at 7–8; Ideanomics 

Letter at 3; Goodman and Olson Letter at 2. See also 

letter from Heidi W. Hardin, MFS Investment 

Management, to Vanessa Countryman, Secretary, 

Commission, dated January 4, 2021. 

249See, e.g., CEI Letter at 4; Kowalczyk Letter at 

3; IBC Letter at 5 (expressing particular concern for 

small boards where aggregated data would provide 

little protection); Publius Letter at 10; Richter Letter 

at 2. 

250See, e.g., Kowalczyk Letter at 3; Publius Letter 

at 10–11; letter from John P. Reddy to Adena 

Friedman, President and CEO, Nasdaq, dated 

December 5, 2020 (‘‘Reddy Letter’’). 

showing the benefits of diverse 

boards.230

Numerous courts (and the 

Commission) have repeatedly held that 

SROs generally are not state actors,231

and commenters identify no persuasive 

basis for reaching a different conclusion 

with respect to the Exchange’s Board 

Diversity Proposal. The Commission’s 

‘‘[m]ere approval’’ of the proposal as 

consistent with the requirements of the 

Act is ‘‘not sufficient’’ to convert it into 

state action.232 Similarly, the fact that 

the Exchange is subject to ‘‘extensive 

and detailed’’ regulation by the 

Commission—including, for example, 

the Commission’s role in reviewing the 

Exchange’s enforcement of its listing 

standards—‘‘does not convert [its] 

actions into those of the 

[Commission].’’ 233 In any event, the 

proposal would survive constitutional 

scrutiny because the objectives set forth 

in the proposal are not mandates, and 

the disclosures that the proposal 

requires are factual in nature and 

advance important interests as 

described throughout this order. 

G. Comments on the Applicability of 

Other Laws to the Board Diversity 

Proposal 

1. Comments on the Materiality 

Standard 

One commenter argues that the Board 

Diversity Proposal would violate 

materiality principles that the 

commenter believes govern securities 

disclosures because the disclosures 

would not help a reasonable investor 

evaluate a company’s performance.234

Another commenter argues that the 

proposal would conflict with the 

Commission’s existing regulatory 

framework for diversity disclosures.235

In response, the Exchange notes the 

Commission’s statement that ‘‘it is 

within the purview of a national 

securities exchange to impose 

heightened governance requirements, 

consistent with the Act, that are 

designed to improve transparency and 

accountability into corporate decision 

making and promote investor 

confidence in the integrity of the 

securities markets.’’ 236 The Exchange 

also states its concern that the current 

lack of transparency and consistency in 

board diversity information makes it 

difficult for investors to determine the 

state of diversity among listed 

companies and boards’ philosophy 

regarding diversity.237 The Exchange 

believes that it is within its authority to 

propose listing rules designed to 

enhance transparency, provided that 

they do not conflict with existing 

federal securities laws.238

As the Commission has previously 

stated, national securities exchanges 

may adopt disclosure requirements in 

their listing rules designed to improve 

governance, as well as transparency and 

accountability into corporate decision 

making for listed issuers, including 

imposing heightened standards over 

that which the Commission currently 

requires.239 Disclosure-related listing 

standards that provide investors with 

information that facilitates informed 

investment and voting decisions 

contribute to the maintenance of fair 

and orderly markets.240 Accordingly, to 

the extent the proposal would result in 

disclosures that are not currently 

required by Commission rules, such 

disclosures would not conflict with the 

Commission’s regulatory framework for 

diversity disclosures. 

2. Comments on Reporting Fraud 

One commenter argues that the 

proposal would be subject to reporting 

fraud,241 and another commenter argues 

that reliance on self-identification for 

board diversity disclosures would pose 

unique liability concerns under the 

antifraud and reporting provisions of 

the federal securities laws.242 In 

response, the Exchange states that 

voluntary self-identification of personal 

characteristics is generally accepted as 

accurate without a ‘‘truth test’’ and that 

the Exchange would not judge the 

accuracy of a director’s selfidentification.243 The Exchange also 

states that some directors may feel that 

a ‘‘truth test’’ would violate their 

privacy rights and right to choose their 

self-identification.244 Moreover, the 

Exchange states that any legal risk that 

may arise from the proposed disclosures 

would be nominal and are outweighed 

by transparency benefits.245

The Board Diversity Proposal would 

not pose unique liability concerns as a 

result of its requirement for companies 

to disclose their directors’ self-identified 

Diverse characteristics, and the 

proposed disclosures would not cause a 

company to be subject to reporting fraud 

any differently from other types of 

company disclosures required by an 

exchange rule. Rather, a company 

would be obligated to accurately 

disclose the self-reported information it 

receives from its directors, and any 

failure to do so would be comparable to 

a failure to accurately disclose any other 

information the company is obligated to 

disclose. 

3. Comments on Director Privacy 

Some commenters believe that the 

proposed aggregated board-level 

diversity statistics disclosures would 

respect individual directors’ privacy,246

including in particular because no 

individual directors would be identified 

as members of an underrepresented 

minority group or as LGBTQ+.247 Some 

commenters also point out that directors 

would not be required to disclose 

information about their diversity 

attributes and, in cases where they did 

not, companies would note their status 

as ‘‘undisclosed.’’ 248 Other commenters, 

however, express concern that the 

proposed disclosures would violate 

directors’ privacy.249 Some also argue 

that individuals do not wish to be 

characterized by their ethnicity, gender, 

or sexual orientation 250 and suggest that 

requiring certain board seats to be filled 

by specific demographic groups could 

invite criticism of such board members’ 

achievements and potentially worsen 


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251See CEI Letter at 2–3; Quigley Letter; 

Kowalczyk Letter at 3; Publius Letter at 10–11; 

Independent Women’s Forum Letter at 1–2. 

252See Nasdaq Response Letter II at 27. See also 

Nasdaq Response Letter I at 13–14. 

253See Nasdaq Response Letter II at 27. 

254See, e.g., Alliance for Fair Board Recruitment 

Letter at 56–58; letter from A. Christians to Vanessa 

Countryman, Secretary, Commission, dated 

February 2, 2021 (‘‘A. Christians Letter’’); Heritage 

Foundation Letter at 12–15; letter from Concerned 

American Executives dated January 2, 2021. Other 

commenters also generally assert discrimination 

concerns. See, e.g., Donnellan Letter at 2; letter from 

Samuel Sloniker, dated December 17, 2020 

(comment letter submitted to File No. SR– 

NASDAQ–2020–082). 

255See Alliance for Fair Board Recruitment at 57– 

58. 

256See Nasdaq Response Letter I at 1, 6–8. The 

Exchange states that only one of the comment 

letters that raises constitutional or discrimination 

concerns with the Board Diversity Proposal was 

submitted by a Nasdaq-listed company that would 

be subject to the proposal. See id. at 4–5. 

257See, e.g., Toomey Letter at 1–3; Free Enterprise 

Project Letter at 3. 

258See NLPC Letter at 7–8; Heritage Foundation 

Letter at 20. 

259Similarly, the disclosures under proposed 

Rule 5606 would be required only ‘‘to the extent 

permitted by applicable law.’’ 

260See NLPC Letter at 6–7. 

261 44 U.S.C. 3502(3) and 5 CFR 1320.3(c). 

262See letter from Werner Lind to Vanessa 

Countryman, Secretary, Commission, dated 

February 6, 2021; A. Christians Letter. 

263 18 U.S.C. 1961(1). 

264 29 U.S.C. 206(d). 

265 42 U.S.C. 2000ff–1(a). 

266See Alliance for Fair Board Recruitment Letter 

at 77–78. This commenter also argues that by 

making certain public statements related to 

diversity, some Commissioners have prejudged the 

Board Diversity Proposal and must recuse 

themselves. See id. at 75–77. But recusal is 

unwarranted. It is settled law that an official may 

take public positions like the statements cited by 

the commenter without diminishing the 

presumption that the official will act fairly and 

impartially in any particular matter. See, e.g., 

Nuclear Info. & Res. Serv. v. NRC, 509 F.3d 562, 571 

(DC Cir. 2007). 

267See, e.g., Free Enter. Fund v. Pub. Co. 

Accounting Oversight Bd., 561 U.S. 477, 487, 509 

(2010). 

268Seila Law LLC, 140 S. Ct. at 2192, 2206. 

269 Id. at 2207. 

270 Id. at 2211. The same commenter’s challenge 

based on the supposition that the proposals would 

be approved by the acting director of the 

Commission’s Division of Trading and Markets, see 

Alliance for Fair Board Recruitment Letter at 74– 

Continued 

stereotypes and prejudices against these 

groups.251

In response, the Exchange states that 

directors may choose not to disclose 

their race, gender, or LGBTQ+ status.252

The Exchange further notes that when 

directors choose to self-identify, the 

Board Diversity Matrix requires 

aggregated disclosures only.253

The proposed disclosures are 

reasonably designed to address potential 

privacy concerns. Specifically, the 

disclosures under proposed Rule 5606 

would be based on directors’ voluntary 

self-identification and would be 

provided on an aggregated basis. 

Moreover, for domestic issuers, while 

the number of directors who fall under 

a specific race and ethnicity would be 

broken down by gender categories, 

information regarding the number of 

directors who self-identify as LGBTQ+ 

would not be broken down, which 

would further lower the likelihood that 

a specific director’s Diverse 

characteristics could be identified from 

the Board Diversity Matrix and further 

mitigate privacy concerns. Similarly, 

Foreign Issuers would not be required to 

break down the number of directors 

who are Underrepresented Individuals 

or who self-identify as LGBTQ+ by 

gender, which again would further 

mitigate privacy concerns. 

4. Other Comments 

Some commenters argue that the 

Board Diversity Proposal would be 

inconsistent with the principles 

underpinning the Civil Rights Act of 

1964, which makes it an unlawful 

employment practice for an employer to 

limit, segregate, or classify its 

employees because of such individual’s 

race, color, religion, sex, or national 

origin.254 One commenter also states 

that even if independent directors are 

not covered by Title VII of the Civil 

Rights Act, directors selected from 

among the company’s employees are 

covered; and a company employee who 

is denied a board position because he or 

she lacks a particular sex, race, or sexual 

orientation trait would have a 

cognizable Title VII claim.255 In 

response, the Exchange argues that Title 

VII does not apply to most directors of 

Nasdaq-listed companies because they 

are not employees and, even if Title VII 

applied, the proposal would not 

discriminate or encourage 

discrimination because the proposed 

board diversity objectives are not 

mandatory.256

Commenters’ concerns that the 

proposal is inconsistent with the 

principles underlying Title VII are 

unwarranted in light of the proposal’s 

framework. Moreover, individual 

employment decisions would continue 

to be governed by Title VII to the extent 

they are covered by that statute. 

Additionally, although some 

commenters also express concern that 

the Board Diversity Proposal may cause 

Nasdaq-listed companies to violate their 

legal fiduciary obligations to their 

shareholders 257 and argue that 

corporate governance is a matter of state 

law,258 the proposal would not cause 

companies to violate their fiduciary 

obligations or violate state laws because, 

as discussed above, the proposal would 

not mandate any particular board 

composition and would not require 

Nasdaq-listed companies to hire 

directors based solely on whether they 

fall within the proposed definition of 

‘‘Diverse.’’ If a company believes that it 

cannot meet the proposed diversity 

objectives because it has concerns 

regarding compliance with other laws, 

rules, or obligations, then the company 

would only need to disclose its reasons 

for not meeting the objectives.259 In 

addition, companies that choose not to 

meet the diversity objectives and not 

explain their reasons for not meeting the 

objectives may transfer their listings to 

a different exchange. 

One commenter argues that the Board 

Diversity Proposal violates the 

Paperwork Reduction Act.260 The Board 

Diversity Proposal, however, contains 

no ‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act, because the 

disclosure contemplated under the 

Board Diversity Proposal is not being 

done ‘‘by or for an agency.’’ 261 Other 

commenters believe that the proposal 

could violate various federal statutes, 

including the federal RICO statute, the 

Equal Pay Act, and the Genetic 

Information Nondiscrimination Act.262

Nothing contemplated in the Board 

Diversity Proposal constitutes 

impermissible activity under the federal 

RICO statute,263 wage discrimination 

between employees on the basis of sex 

under the Equal Pay Act,264 or 

discrimination based on genetic 

information under the Genetic 

Information Nondiscrimination Act.265

One commenter argues that approval 

of the Board Diversity Proposal would 

be unconstitutional because the 

Commission’s commissioners are 

unlawfully insulated from Presidential 

control.266 But the Commission’s 

independent structure complies with 

constitutional requirements.267 Contrary 

to the views of one commenter, the 

Supreme Court’s decision in Seila Law 

LLC v. CFPB, 140 S. Ct. 2183 (2020), 

does not alter that conclusion. There, 

the Court—twice—expressly declined to 

‘‘revisit’’ its earlier decisions affirming 

Congress’s authority to ‘‘create expert 

agencies led by a group of principal 

officers removable by the President only 

for good cause.’’ 268 Instead, the Court 

made clear that it was ‘‘the CFPB’s 

leadership by a single independent 

Director’’ that ‘‘violate[d] the separation 

of powers.’’ 269 And the Court invited 

Congress to remedy the ‘‘problem’’ by 

‘‘converting the CFPB into a 

multimember agency’’ like the 

Commission.270


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75, is inapplicable because the Commission, not the 

Division of Trading and Markets pursuant to 

delegated authority, is approving the proposed rule 

change. 

271See, e.g., letter from Marc H. Morial, President 

and CEO, National Urban League, to Vanessa 

Countryman, Secretary, Commission, dated January 

4, 2021 (‘‘NUL Letter’’), at 4–5; CtW Letter at 2. 

272See Nasdaq Response Letter II at 6–7. 

273See letter from Snowdon Beinn, Snowdon 

Beinn Ltd., to Vanessa Countryman, Secretary, 

Commission, dated January 4, 2021. 

274See Carlyle Letter at 2. 

275See Alliance Letter at 2. 

276See Nasdaq Response Letter II at 14. 

277See id. 278See NUL Letter at 2–5. 

279See letter from Aldrin K. Enis, President, One 

Hundred Black Men, Inc., dated January 4, 2021. 

280See NUL Letter at 4. 

281See letter from Omar A. Karim, President, 

Banneker Ventures, and Chairman, The Collective, 

to Vanessa Countryman, Secretary, Commission, 

dated January 4, 2021 (‘‘Collective Letter’’). 

282See letter from David A. Bell, Co-Chair, 

Corporate Governance, Fenwick & West LLP, to 

Vanessa Countryman, Secretary, Commission, dated 

January 4, 2021, at 2. 

283See Nasdaq Response Letter II at 15–16 (also 

noting that the Exchange based its proposed 

definition of Underrepresented Minority on the 

categories reported to the EEOC through the 

EEO–1 report and that the Exchange included a 

category for LGBTQ+ status in recognition of the 

Supreme Court’s decision in Bostock v. Clayton 

Cnty., Ga., 140 S. Ct. 1731, 1742 (2020), which held 

that sexual orientation and gender status are 

‘‘inextricably’’ intertwined with sex). 

284See id. at 16. 

285See Ideanomics Letter at 4. 

286See Nasdaq Response Letter II at 16. 

287See id. 

288See, e.g., CtW Letter at 2; letter from Mark 

Ferguson and Miguel Nogales, Co-Chief Investment 

Officers, Global Equity Strategy, Generation 

Investment Management LLP, at 1. 

289See LGIM America Letter at 3. 

290See Nasdaq Response Letter II at 4. 

291See id. 

292See, e.g., New York City Controller Letter at 

1. 

293See Ropes & Gray Letter at 2–3. See also 

Skadden Letter at 3; Trillium Letter at 2. 

294See, e.g., WomenExecs Letter; New York City 

Comptroller Letter at 3; Ropes & Gray Letter at 3. 

One commenter asserts that if the Commission 

‘‘chooses to countenance diversity statistical 

reporting, it should require reporting of types of 

diversity that are more relevant to business success 

than the immutable racial, ethnic or sexual 

characteristics of its directors.’’ See Heritage 

Foundation Letter, at 4, 20. 

H. Commenter Suggestions on the Board 

Diversity Proposal 

The Exchange revised the Board 

Diversity Proposal in response to certain 

commenter suggestions and explained 

why it did not revise the proposal in 

response to others. The Exchange’s 

decision not to incorporate certain 

suggestions does not render the current 

proposal without a rational basis or 

inconsistent with the Act. As described 

throughout this order, the Board 

Diversity Proposal satisfies the statutory 

and regulatory requirements for 

approval. The comments the Exchange 

did not incorporate into its proposal are 

nonetheless briefly described below. 

Some commenters suggest that the 

Board Diversity Proposal should impose 

a diversity requirement rather than 

provide for a ‘‘comply-or-disclose’’ 

framework.271 As discussed above, the 

Exchange asserts that its proposal 

appropriately balances the calls of 

investors for companies to increase 

diverse representation on their boards 

with the need for companies to maintain 

flexibility and decision-making 

authority over their board 

composition.272

One commenter suggests that the 

concept of cognitive diversity (or 

diversity of thought) should be 

introduced into the proposed rules and 

disclosures.273 Another commenter 

states that the proposed definition of 

‘‘Diverse’’ is pragmatic, and that it is 

important that the proposal include the 

flexibility to modify or expand the set 

of included demographic groups.274

Another commenter encourages the 

Exchange to assess whether the 

proposed definition of ‘‘Diverse’’ should 

be expanded.275 The Exchange responds 

that companies would not be precluded 

from using a broader definition of 

diversity, provided that the company 

discloses this under proposed Rule 

5605(f)(3).276 With respect to 

commenters’ views that the definition of 

Diverse should be expanded, the 

Exchange states that its proposal 

inherently recognizes the cognitive 

diversity and broader range of 

experiences that diverse directors bring 

to the boardroom.277

One commenter argues that the Board 

Diversity Proposal would create 

structural competition among 

minorities,278 and some commenters 

request that the proposal explicitly 

require two Black or African American 

directors 279 or require one African 

American (or another racial/ethnic 

minority) director and a director who is 

a member of the LGBTQ community, 

one of whom might also be female.280

One commenter suggests that the 

proposal be limited to individuals of 

underrepresented racial minorities.281

Another commenter states that the 

proposal would not address how a 

director of Central Asian descent would 

be classified and that the proposal 

would potentially preclude them from 

being considered ‘‘Diverse,’’ as it would 

with persons of North African or Middle 

Eastern descent.282 In response, the 

Exchange states that it chose its 

definition of ‘‘Diverse’’ to ensure that 

more categories of historically 

underrepresented individuals are 

included and to allow companies the 

flexibility to diversify their boards in a 

manner that fits their unique 

circumstances and stakeholders.283 The 

Exchange states that companies may 

choose to meet the proposed diversity 

objectives by, for example, having two 

directors who self-identify as Black or 

African American, or by having two 

directors who self-identify in racial or 

ethnic categories beyond those included 

in the EEO–1 report (e.g., Middle 

Eastern, North African, Central Asian) 

and describing that the company 

considers diversity more broadly than 

the proposed definition of ‘‘Diverse.’’ 284

One commenter suggests that the 

Exchange expand the definition of 

‘‘Diverse’’ to ensure that companies 

with operations in other countries do 

not simply use the availability of 

candidates in those countries to fill a 

director or officer role when the people 

within those countries could be 

considered a minority in the U.S.285 In 

response, the Exchange states that a 

company is not precluded from 

satisfying proposed Rule 5605(f)(2) with 

a director who is not a U.S. citizen or 

resident,286 and that it is solely in the 

company’s discretion to identify 

qualified director nominees who reflect 

diverse backgrounds that are reflective 

of the company’s communities, 

employees, investors, or other 

stakeholders, regardless of the director’s 

nationality.287

Some commenters suggest that more 

than two Diverse directors may be 

necessary to have a strong voice in the 

boardroom.288 Another commenter 

believes that two Diverse directors is a 

reasonable minimum standard to 

escalate market awareness of listed 

companies with limited diversity.289 In 

response, the Exchange states that the 

Board Diversity Proposal would provide 

companies with a flexible, attainable 

approach to achieving a reasonable 

objective that is not overly burdensome 

or coercive.290 The Exchange also states 

that the proposed objective of two 

Diverse directors would align investors’ 

demands for increased board diversity 

with companies’ needs for a flexible 

approach that accommodates each 

company’s unique circumstances.291

Some commenters suggest that 

diversity statistics should be disclosed 

on a director-by-director basis,292 or that 

companies should at least be permitted 

to disclose diversity statistics on a 

director-by-director basis.293 Some 

commenters encourage companies to 

also disclose a skills matrix for the 

board, aligned with the companies’ 

strategic needs and succession planning, 

and a policy on board refreshment.294


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295See WomenExecs Letter. 

296See CFA Letter at 5–6. 

297See Nasdaq Response Letter II at 18. 

298See id. 

299See, e.g., Thirty Percent Coalition Letter at 2; 

Boston Club Letter at 2; Ropes & Gray Letter at 2. 

300See Nasdaq Response Letter II at 17. 

301See NUL Letter at 5. 

302See Collective Letter at 2. 

303See Olshan Letter at 3. 

304See, e.g., Fairfax Letter at 13; Skadden Letter 

at 2–3; Microsoft Letter at 2; Ariel Letter at 2; T. 

Rowe Letter at 2; Brightcove Letter; Mercy 

Investment Letter at 2; letter from Faye Sahai, 

Partner, Mirai Global, to Vanessa Countryman, 

Secretary, Commission, dated December 14, 2020. 

305See Nasdaq Response Letter II at 5–6. 

306See letter from Suzanne Rothwell, Managing 

Member, Rothwell Consulting LLC, to Vanessa 

Countryman, Secretary, Commission, dated 

December 23, 2020, at 3. 

307See Nasdaq Response Letter II at 16. 

308See Amendment No. 1 to the Board Recruiting 

Service Proposal at 10. The Exchange states that 

research demonstrates diverse boards are positively 

associated with improved corporate governance and 

company performance. See id. at 6. Moreover, the 

Exchange states that investors and investor groups 

are calling for diversification in the boardroom, and 

legislators at the federal and state level are 

increasingly taking action to respond to those calls. 

See id. at 9–10. 

309See id. at 10. 

310See id. at 13, 15. 

311See id. 

312See id. at 13–14. Although proposed Rule 

5605(f)(2)(D) would require a Company with a 

Smaller Board to have, or explain why it does not 

have, at least one Diverse director on its board, such 

a company would be considered an Eligible 

Company if it does not have at least one director 

who self-identifies as Female and at least one 

director who self-identifies as an Underrepresented 

Minority or LGBTQ+, which the Exchange believes 

would help promote greater diversity on boards of 

all sizes. See id. at 11 n.20. 

313See id. at 14. 

314See, e.g., Ideanomics Letter at 4; Goodman and 

Olson Letter at 2–3; Capital Research and 

Management Company Letter at 2; UAW Letter at 

3. 

315See, e.g., Toomey Letter at 3; letter from 

Matthew Glen dated December 31, 2020 (comment 

letter submitted to File No. SR–NASDAQ–2020– 

082) (‘‘Glen Letter’’); letter from Eugene Kelly to 

Vanessa Countryman, Secretary, Commission, dated 

December 13, 2020 (‘‘Kelly Letter’’). 

316See, e.g., Ideanomics Letter at 4; Goodman and 

Olson Letter at 2–3; Capital Research and 

Management Company Letter at 2; UAW Letter at 

3; California State Treasurer Letter. 

317See UAW Letter at 3. 

318See Toomey Letter at 3. 

One commenter also suggests that 

directors should be subject to regular reelection based on satisfactory evaluation 

of their contribution to the board, and 

that a report from the nomination 

committee explaining how it considered 

the representation of women and/or 

other minorities in director selection 

and board evaluation would also be 

useful.295 One commenter encourages 

the Exchange and the Commission to 

consider whether the disclosure 

requirements should extend to board 

nominees.296 In response, the Exchange 

states that the proposal seeks a balance 

between obtaining key board diversity 

data and respecting the privacy of 

directors (with respect to the 

suggestions for director-by-director 

disclosures) and that limiting the 

disclosures to current directors 

optimizes the consistency and 

comparability of board diversity 

statistical information across companies 

(with respect to the suggestions for 

disclosures relating to board 

nominees).297 Moreover, the Exchange 

states that a company would not be 

prohibited from disclosing more detail 

than required by the Board Diversity 

Matrix.298

Some commenters suggest that the 

Board Diversity Matrix should be 

included in companies’ annual 

shareholders meeting proxy or 

information statement filed with the 

Commission, rather than solely posted 

on the web.299 In response, the 

Exchange states that it is in the public 

interest to allow companies the 

flexibility to publish board diversity 

information through alternatives other 

than Commission filings, because it 

would avoid imposing additional 

disclosure and filing obligations on 

companies while providing 

shareholders with access to information 

in a recognized channel of 

distribution.300

One commenter states that the phasein periods under proposed Rule 5605(f) 

are too long.301 Another suggests that 

companies should have two Diverse 

directors within one calendar year after 

the approval date of proposed Rule 

5605(f).302 A different commenter 

suggests reducing the proposed two-, 

four-, and five-year phase-in periods by 

one year each.303 Some commenters 

instead express support for the 

proposed phase-in and transition 

periods.304 In response, the Exchange 

notes that an accelerated timeframe may 

increase challenges for companies 

seeking to meet the objectives of 

proposed Rule 5605(f), particularly 

smaller companies.305

One commenter requests that the 

Exchange commit to publishing a study 

of the impact of the proposals on board 

diversity and the relationship between 

diversity and corporate governance and 

financial results.306 In response, the 

Exchange states that the greater benefit 

of publicly disclosing board diversity 

data would be that all interested parties 

can adequately conduct their own 

analyses of the impact of the proposal 

on board diversity and its relationship 

with company performance and that the 

Exchange welcomes these analyses.307

I. Board Recruiting Service Proposal 

As described above, the Board 

Recruiting Service Proposal would 

provide certain Nasdaq-listed 

companies with one year of 

complimentary access for two users to a 

board recruiting service, which would 

provide access to a network of boardready diverse candidates for companies 

to identify and evaluate. In the proposal, 

the Exchange states that offering a board 

recruiting service would assist listed 

companies with increasing diverse 

board representation, which the 

Exchange believes could result in 

improved corporate governance, 

strengthening of market integrity, and 

improved investor confidence.308 The 

Exchange further states that offering this 

service would help companies to 

achieve compliance with the Board 

Diversity Proposal, if it were 

approved.309 The Exchange states that 

utilization of the complimentary board 

recruiting service would be optional, 

and no company would be required to 

use the service.310

The Exchange further argues that it is 

reasonable and not unfairly 

discriminatory to offer the board 

recruiting service only to Eligible 

Companies because the Exchange 

believes these companies have the 

greatest need to identify diverse board 

candidates, particularly if these 

companies elect to meet the diversity 

objectives in the Board Diversity 

Proposal, if approved, rather than 

disclosing why they have not met the 

objectives.311 Additionally, the 

Exchange believes that companies that 

already have two Diverse directors have 

demonstrated by their current board 

composition that they do not need 

additional assistance provided by the 

Exchange to identify diverse candidates 

for their boards.312 Finally, the 

Exchange believes that offering this 

service would help it compete to attract 

and retain listings.313

Some commenters express general 

support for the Board Recruiting Service 

Proposal,314 while others oppose the 

Board Recruiting Service Proposal.315

The commenters supporting the 

proposal state that the proposed service 

would assist companies that choose to 

diversify their boards 316 and would be 

of particular benefit to smaller 

companies.317 One commenter opposing 

the proposal argues that the Exchange 

does not identify how it would address 

the potential conflicts of interest 

between establishing a regulatory 

standard and concurrently promoting a 

revenue-generating compliance 

solution.318 Another argues that the 


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319See Glen Letter. 

320See Kelly Letter. 

321See Nasdaq Response Letter II at 20–21. 

322See id. at 21. 

323See id. at 21–22. 

324See id. 

325 15 U.S.C. 78f, 78f(b)(4)–(5). In approving the 

Board Recruiting Service Proposal, the Commission 

has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

326 15 U.S.C. 78f(b)(8). 

327The Commission has previously approved the 

provision of complimentary services by the 

Exchange to varying categories of eligible listed 

companies. See, e.g., Securities Exchange Act 

Release Nos. 65963 (December 15, 2011), 76 FR 

79262 (December 21, 2011) (SR–NASDAQ–2011– 

122) and 72669 (July 24, 2014), 79 FR 44234 (July 

30, 2014) (SR–NASDAQ–2014–058). 

328See Amendment No. 1 to the Board Recruiting 

Service Proposal at 10. 

329See id. at 13–14. 

330The Commission has previously found that the 

specific needs of differently situated categories of 

listings (e.g., new listings, transfers, larger 

capitalized issuers) is a sufficient basis for 

providing additional services, or varying the types 

of services provided, to different categories of 

listings, and thereby does not raise unfair 

discrimination issues under the Act. See, e.g., 

Securities Exchange Act Release Nos. 78806 

(September 9, 2016), 81 FR 63523 (September 15, 

2016) (order approving SR–NASDAQ–2016–098); 

72669 (July 24, 2014), 79 FR 44234 (July 30, 2014) 

(order approving SR–NASDAQ–2014–058). 

331See Amendment No. 1 to the Board Recruiting 

Service Proposal at 12, 15. 

332See supra notes 56–59 (describing this 

competitive environment for exchange listings). 

333 15 U.S.C. 78f(b)(8). 

334See supra notes 321–322 and 331 and 

accompanying text. 

335See supra note 324 and accompanying text. 

336See supra note 310 and accompanying text. 

Board Recruiting Service Proposal 

would divert funds from the efficient 

administration of the Exchange, 

reducing the order and efficiency of 

markets that the Commission was 

created to promote.319 Finally, another 

commenter opposing the proposal 

argues that the proposed complimentary 

recruiting service would be an extension 

of the ‘‘unlawful’’ and ‘‘discriminatory’’ 

quota policy contained in the Board 

Diversity Proposal by seeking to move 

Nasdaq-listed companies towards 

intentionally implementing 

‘‘discriminatory hiring practices.’’ 320

In response, the Exchange states that 

it is not generating any revenue from its 

partnership with the proposed provider 

of the board recruiting service, Equilar, 

and instead is offering these services to 

companies at its own expense.321 The 

Exchange also states that the 

complimentary service does not 

introduce any conflict of interest 

because the Exchange is not in the board 

recruitment services business.322 In 

addition, the Exchange states that there 

is no requirement that listed companies 

take advantage of the complimentary 

service, and there is no requirement that 

they pay for the service if they choose 

to utilize it.323 Moreover, the Exchange 

states that whether a listed company 

takes advantage of the complimentary 

board recruiting service has no 

relationship to how, or whether, the 

Exchange would enforce proposed Rule 

5605(f), and there are no circumstances 

under which the Exchange would 

penalize a company solely for its 

decision to not take advantage of a 

complimentary board recruiting 

service.324

The Board Recruiting Service 

Proposal is consistent with the 

requirements of Section 6 of the Act, 

including Sections 6(b)(4) and 

6(b)(5).325 The proposal is designed to 

provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among Exchange members, issuers, and 

other persons using the Exchange’s 

facilities, and is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

And the proposal is consistent with 

Section 6(b)(8) 326 because it does not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

The Commission finds that it is 

consistent with the Act for the Exchange 

to provide a one-year complimentary 

board recruiting service to Eligible 

Companies.327 The board recruiting 

service would provide access to a 

network of board-ready diverse 

candidates, allowing companies to 

identify and evaluate such candidates. 

The board recruiting service would also 

assist Eligible Companies that choose to 

use the service to increase diverse 

representation on their boards and 

would help Eligible Companies to meet 

(or exceed, in the case of a Company 

with a Smaller Board) the proposed 

diversity objectives under the Board 

Diversity Proposal.328

It is also consistent with the Act for 

the Exchange to offer the complimentary 

board recruiting service only to Eligible 

Companies because, by definition, those 

companies do not have a specified 

number of Diverse directors and 

therefore may have a greater interest or 

feel a greater need to identify diverse 

board candidates by utilizing the board 

recruiting service than non-Eligible 

Companies.329 The provision of the 

service only to Eligible Companies is 

thus an equitable allocation of 

complimentary services and does not 

unfairly discriminate among issuers.330

Further, offering the one-year 

complimentary service would help the 

Exchange compete to attract and retain 

listings, particularly in light of the 

diversity objective in the separately 

approved Board Diversity Proposal. The 

Exchange has indicated that individual 

listed companies would not be given 

specially negotiated packages of 

products or services to list, or remain 

listed; that no other company will be 

required to pay higher fees as a result 

of the proposal; and that providing the 

complimentary board recruiting service 

will have no impact on the resources 

available for its regulatory programs.331

No commenter has provided any reason 

to doubt these indications as to how the 

service will be run. Accordingly, the 

proposal reflects the current competitive 

environment for listings among national 

securities exchanges,332 does not 

impose any unnecessary or 

inappropriate burden on competition 

between individual listed companies, 

and is therefore appropriate and 

consistent with Section 6(b)(8) of the 

Act.333

In addition, describing in the 

Exchange’s rules the products and 

services available to listed companies 

and their associated values also adds 

greater transparency to the rules and 

applicable fees and will ensure that 

individual listed companies are not 

given specially negotiated packages of 

products or services to list, or remain 

listed, that would raise unfair 

discrimination issues under the Act. 

Finally, with respect to concerns that 

the Exchange’s offering of the board 

recruiting service may create a conflict 

of interest or divert funds from the 

efficient administration of the Exchange, 

the Exchange has indicated that 

providing the proposed complimentary 

service would have no impact on the 

resources available for its regulatory 

programs and that it will not generate 

any revenue from the service, nor is it 

in the board recruitment services 

business.334 The Exchange further 

explains that utilization of the board 

recruiting service will not impact the 

manner in which it enforces compliance 

with the Board Diversity Proposal.335

With respect to a concern that the 

recruiting service may influence a 

Nasdaq-listed company’s hiring 

practice, the Exchange has emphasized 

that utilization of the service would be 

optional, and no company would be 

required to use it.336 Here again, 

commenters have provided no reason 

for the Commission to doubt the 

Exchange’s indication about how the 

service will be run. Accordingly, the 

Exchange’s representations and the 

optionality of the board recruiting 

service are sufficient to address 

commenters’ concerns that the 

provision of the complimentary service 


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Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices 44445 

337 15 U.S.C. 78s(b)(2). 

may create a conflict of interest, divert 

funds from the efficient administration 

of the Exchange, or unduly influence 

listed companies. 

III. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,337 that: (1) 

The proposed rule change (SR– 

NASDAQ–2020–081), as modified by 

Amendment No. 1, be, and hereby is, 

approved, and (2) the proposed rule 

change (SR–NASDAQ–2020–082), as 

modified by Amendment No. 1, be, and 

hereby is, approved. 

By the Commission. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17179 Filed 8–11–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–360, OMB Control No. 

3235–0409] 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rules 17Ad–15 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the existing collection of information 

provided for in Rule 17Ad–15 (17 CFR 

240.17Ad–15) (‘‘Rule 17Ad–15’’) under 

the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.) (‘‘Exchange Act’’). 

The Commission plans to submit this 

existing collection of information to the 

Office of Management and Budget 

(‘‘OMB’’) for extension and approval. 

Rule 17Ad–15 requires every 

registered transfer agent to establish 

written standards for the acceptance of 

guarantees of securities transfers from 

eligible guarantor institutions. Every 

registered transfer agent is also required 

to establish procedures, including 

written guidelines where appropriate, to 

ensure that the transfer agent uses those 

standards to determine whether to 

accept or reject guarantees from eligible 

guarantor institutions. In implementing 

these requirements, the Commission’s 

purpose is to ensure that registered 

transfer agents treat eligible guarantor 

institutions equitably. 

Additionally, Rule 17Ad–15 requires 

every registered transfer agent to make 

and maintain records in the event the 

transfer agent determines to reject 

signature guarantees from eligible 

guarantor institutions. Registered 

transfer agents’ records must include, 

following the date of rejection, a record 

of the rejected transfer, along with the 

reason for rejection, the identification of 

the guarantor, and an indication 

whether the guarantor failed to meet the 

transfer agent’s guarantee standards. 

Rule 17Ad–15 requires registered 

transfer agents to maintain these records 

for a period of three years. The 

Commission designed these mandatory 

recordkeeping requirements to assist the 

Commission and other regulatory 

agencies with monitoring registered 

transfer agents and ensuring compliance 

with the rule. This rule does not involve 

the collection of confidential 

information. 

The Commission estimates that 

approximately 366 registered transfer 

agents will spend a total of 

approximately 14,640 hours per year 

complying with recordkeeping 

requirements of Rules 17Ad–15 (40 

hours per year per registered transfer 

agent). 

Written comments are invited on: (a) 

Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information shall have practical utility; 

(b) the accuracy of the Commission’s 

estimates of the burden of the proposed 

collection of information; (c) ways to 

enhance the quality, utility, and clarity 

of the information collected; and (d) 

ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Consideration will be given to 

comments and suggestions submitted in 

writing within 60 days of this 

publication. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: (ii) David Bottom, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Cynthia 

Roscoe, 100 F Street NE, Washington, 

DC 20549, or send email to: PRA_

Mailbox@sec.gov. 

Dated: August 6, 2021. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17154 Filed 8–11–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–521, OMB Control No. 

3235–0579] 

Proposed Collection; Comment 

Request 

Upon Written Request Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Regulation BTR 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.), the Securities 

and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the collection of information 

summarized below. The Commission 

plans to submit this existing collection 

of information to the Office of 

Management and Budget for extension 

and approval. 

Regulation Blackout Trade Restriction 

(‘‘Regulation BTR’’) (17 CFR 245.100– 

245.104) clarifies the scope and 

application of Section 306(a) of the 

Sarbanes-Oxley Act of 2002 (‘‘Act’’) (15 

U.S.C. 7244(a)). Section 306(a)(6) [15 

U.S.C.7244(a)(6)] of the Act requires an 

issuer to provide timely notice to its 

directors and executive officers and to 

the Commission of the imposition of a 

blackout period that would trigger the 

statutory trading prohibition of Section 

306(a)(1) [15 U.S.C. 7244(a)(1)]. Section 

306(a) of the Act prohibits any director 

or executive officer of an issuer of any 

equity security, directly or indirectly, 

from purchasing, selling or otherwise 

acquiring or transferring any equity 

security of that issuer during any 

blackout period with respect to such 

equity security, if the director or 

executive officer acquired the equity 

security in connection with his or her 

service or employment. Approximately 

1,230 issuers file Regulation BTR 

notices approximately 5 times a year for 

a total of 6,150 responses. We estimate 

that it takes approximately 2 hours to 

prepare the blackout notice for a total 

annual burden of 2,460 hours. The 

issuer prepares 75% of the 2,460 annual 

burden hours for a total reporting 

burden of (1,230 issuers × 2 hours per 

issuer × 0.75) 1,845 hours. In addition, 

we estimate that an issuer distributes a 


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