PHOENIX – Attorney General Mark Brnovich is leading a coalition of 17 states to urge the court to overturn the U.S. Securities and Exchange Commission’s (SEC) approval of a Nasdaq rule (Quota Rule) that promotes discrimination on boards.
The Quota Rule requires boards of Nasdaq-listed companies to have a fixed-number requirement for women and either racial minorities or self-identified LGBTQ+ members. The proposed rule not only conflicts with the federal constitution but undermines state law. And it not only engages in unlawful race-and sex-based discrimination but does so in the most offensive way possible: explicit quotas.
The SEC, acting through its approval of the Quota Rule, is encroaching on an area of traditional state concern—corporate governance. The Exchange Act was deliberately limited in scope and has never been understood to allow entities like Nasdaq to use their management authority over the financial system to address matters outside the maintenance of fair and honest markets in securities. The Quota Rule is transparently an attempt to effectuate social change, although falsely (but only intermittently) characterized as a mere disclosure requirement.
Additionally, the Quota Rule violates several states’ laws regarding civil rights. Arizona’s Civil Rights Law expressly states that employers may not discriminate in employment on the basis of race or sex and may not “limit, segregate or classify employees or applicants” “because of the individual’s race, color, religion, sex, age, or national origin or on the basis of disability.” But the Quota Rule necessarily requires corporations to “classify” directors based on prohibited grounds.
Copy of amicus brief here.
