Is Nasdaq's Proposed Listing Standard Legal In California?

Allen Matkins
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Allen Matkins

The Nasdaq Stock Market LLC made headlines earlier this month by proposing amendments to its listing rules with a goal of promoting board of directors diversity.  If approved by the Securities and Exchange Commission, Nasdaq will, among other things, require its listed companies, subject to certain exceptions, to:

  • have at least one director who self-identifies as a female, and
  • have at least one director who self-identifies as Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+;or
  •  explain why the company does not have at least two directors on its board who self-identify in the foregoing categories.

California's landmark Unruh Civil Rights Act  provides:

" All persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, or immigration status are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever."

Cal. Civ. Code § 51(b).   The question, of course, is whether an obligation to include particular persons based on sex, race, ethnicity and sexual orientation denies individuals not identified by the proposed rule "full and equal" advantages.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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