Nasdaq Simplifies Diversity Rule Compliance Deadlines

On December 12, 2022, The Nasdaq Stock Market LLC (Nasdaq) submitted to the United States Securities and Exchange Commission (SEC) a proposed rule change that is intended to simplify and streamline the relevant deadlines under Nasdaq’s board diversity listing standards. Those listing standards, which were approved by the SEC in August 2021 (and which we wrote about here), require listed companies to satisfy certain diversity objectives (or to publish explanatory disclosures as to why the company has not satisfied such diversity objectives). As originally approved by the SEC, the listing standard included staggered phase-in times that were tied to the date on which the SEC approved such standard (the “Approval Date”); however, according to the SEC’s order approving the requested change, Nasdaq concluded that the compliance deadlines are “confusing and unnecessarily complicated.” Under the modified listing standard, which the SEC declared effective immediately (which approval can be found here), the deadlines were changed by eliminating references to the Approval Date and tying compliance instead to December 31 of the relevant year in which compliance is required. Specifically, the modified deadlines are now as follows:

• A Nasdaq-listed company must have, or explain why it does not have, at least one diverse director no later than December 31, 2023.
• Each company listed on The Nasdaq Global Select Market or The Nasdaq Global Market must have, or explain why it does not have, at least two diverse directors no later than December 31, 2025.
• Each company listed on The Nasdaq Capital Market must have, or explain why it does not have, at least two diverse directors no later than December 31, 2026.
• The annual compliance deadline applicable to the diversity matrix requirement in the listing standard, which already was effective, has been re-aligned to match the December 31 deadlines referenced above.

As a reminder, for purposes of this listing standard, “diverse” means a director who self-identifies as a female, an underrepresented minority (e.g., a director who is African American, Hispanic, Asian, Native American or two or more ethnicities) or LGBTQ+.

Finally, we note that Nasdaq’s diversity listing standard has been challenged in federal court and remains sub judice before the United States Court of Appeals for the 5th Circuit. Please do not hesitate to reach out to us if you have any questions or require additional information.