On December 1, 2020, Nasdaq proposed new listing rules that, if approved by the SEC following a public comment period,[1] would require Nasdaq-listed companies either to have, or explain why they do not have, at least two diverse directors and disclose information about the diversity of their directors on an annual basis.  The new rules, if adopted, would be the first federal rules that effectively require companies to retain diverse board members.[2]  The release filed with the SEC is available here.

Specifically, Nasdaq-listed companies would be required to

  • have at least one director who self-identifies as a female, and at least one director who self-identifies as an underrepresented minority (which means 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), or as LGBTQ+; or
  • explain, in either the company’s annual meeting proxy statement or on the company’s website, why the company does not have two diverse directors.

If approved by the SEC without modification, the new requirements would be phased in over a two to five-year period following SEC approval as follows: 

  • within two calendar years, every Nasdaq-listed company must have, or explain why it does not have, one diverse director;
  • within four calendar years, each company listed on the Nasdaq Global Select or Global Market tiers must have, or explain why it does not have, two diverse directors; and
  • within five calendar years, each company listed on the Nasdaq Capital Market tier must have, or explain why it does not have, two diverse directors.

As proposed, this rule is subject to certain exceptions, including:

  • following the transition period described above, newly listed companies, including IPOs, will have one year from the listing date to comply;
  • smaller reporting companies can satisfy the requirement to have two diverse directors by having two female directors; and
  • foreign issuers can satisfy the second diverse director requirement by having a second female director, an individual who self-identifies as LGBTQ+, or an underrepresented individual based on national, racial, ethnic, indigenous, cultural, religious or linguistic identity in the company’s home country jurisdiction.

Nasdaq also proposed a new listing rule that would require listed companies, within one year following SEC approval of the rule, to disclose statistical information in a uniform format about the self-identified gender, race and LGBTQ+ status of their directors in either the company’s annual meeting proxy statement or on the company’s website. Implementation of this listing rule would require more detailed diversity information than what is required under existing SEC rules, which only address how diversity is considered in identifying board nominees.[3]

The proposal comes at a time of increasing focus on board diversity among companies, investors, state legislatures, and other stakeholders, and more broadly we expect the discussion of diversity, ESG, and human capital to intensify under the new Administration. We expect the SEC to address this proposal following the appointment of a new SEC Chairman.     

If you have questions about these new proposed rules, please contact your Proskauer attorney or one of the capital markets attorneys listed on this alert.

[1]              According to Nasdaq, the SEC will provide a minimum of 21 days from the time the proposed rule changes are published in the Federal Register for the public (including investors, companies, and their representatives) to have an opportunity to comment on the proposal, and the SEC will have 30 to 240 calendar days to approve the proposal.

[2]              To date, eleven states have passed or proposed legislation related to board diversity. For example, California requires companies headquartered in the state to have at least one director who self-identifies as a female and at least one director from an underrepresented community. See Cal. S.B. 826 (Sept. 30, 2018); Cal. A.B. 979 (Sept. 30, 2020).

[3]              Pursuant to Item 407(c)(2)(vi) of Regulation S-K, companies must describe how the nominating committee (or the board) considers diversity in identifying nominees for director (including information about any related policies). However, the Regulation S-K Compliance & Disclosure Interpretations (Question 116.11) state the SEC staff’s “expectation” that self-identified diversity characteristics of a director relevant to the director’s qualifications or experience would, with the director’s consent, be disclosed.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Peter Castellon Peter Castellon

Peter represents issuers, underwriters and selling shareholders in connection with offerings of securities, including IPOs, follow-on and secondary offerings, block trades, rights offerings and offerings of convertible and exchangeable bonds.

Peter is active in bar association activities and has served as an officer…

Peter represents issuers, underwriters and selling shareholders in connection with offerings of securities, including IPOs, follow-on and secondary offerings, block trades, rights offerings and offerings of convertible and exchangeable bonds.

Peter is active in bar association activities and has served as an officer of several committees, including the IBA Capital Markets Forum, the International Securities Matters Subcommittee of the ABA Committee on the Federal Regulation of Securities and the ABA International Securities & Capital Markets Committee.

Peter has written several articles on securities law topics, including the following:

  • US Private Placements: When Rule 144A is unavailable, PLC, July, 2015.
  • SAS 72 letters: Seeking comfort, PLC, May, 2013.

  • Another way in, IFLR, March, 2012.

Before joining Proskauer, Peter was Deputy General Counsel for Citi and advised the Equity Capital Markets Division and Investment Banking Division. While at Citi, Peter worked on most of Citi’s ECM transactions in Europe, the Middle East and Africa.

Photo of Michael Choate Michael Choate

Michael Choate is a partner in the Corporate Department and is a member of the Capital Markets Group and both Real Estate Capital Markets and Private Equity Real Estate Groups. Michael’s practice is broad and includes a focus on transactional matters involving both…

Michael Choate is a partner in the Corporate Department and is a member of the Capital Markets Group and both Real Estate Capital Markets and Private Equity Real Estate Groups. Michael’s practice is broad and includes a focus on transactional matters involving both public and private offerings as well as private equity and joint venture transactions along with mergers and acquisitions, corporate governance issues and federal securities compliance matters.

Photo of James Gerkis James Gerkis

James P. Gerkis is a partner in the Corporate Department with extensive experience in sophisticated U.S. and global corporate transactions, including mergers & acquisitions, capital markets, venture capital, media, real estate and restructuring transactions.  He has represented a wide variety of financial institutions…

James P. Gerkis is a partner in the Corporate Department with extensive experience in sophisticated U.S. and global corporate transactions, including mergers & acquisitions, capital markets, venture capital, media, real estate and restructuring transactions.  He has represented a wide variety of financial institutions, Fortune 500 companies and growth companies.  James currently focuses on matters for clients in the technology, media and real estate industries.

Among other clients, James has represented iHeartMedia, Preferred Apartment Communities, Financial Guaranty Insurance Company, Oxford Analytica, Olshan Properties, the Creditors Committee in the chapter 11 cases of Westinghouse Electric Company, Lightstone Group, Neuberger Berman and Suburban Propane Partners.

James received his law degree from Columbia University School of Law in 1983, where he was a Harlan Fiske Stone Scholar and a Teaching Fellow.  He did his undergraduate work at Columbia College, where (having been admitted without finishing high school) he received a BA degree in Political Science in 1980.

James has made presentations at numerous industry and bar association conferences and has authored many articles on different legal topics.

James is the President of the Columbia University Club of New York, is active in other Columbia University alumni affairs and has been chosen to receive a 2018 Columbia University Alumni Medal.

James is on the Board of Directors of HABA-Hellenic American Association for Professionals in Finance.  James received the 2017 Attorney of the Year Award from The Hellenic Lawyers Association.

Photo of Steven L. Lichtenfeld Steven L. Lichtenfeld

Steven L. Lichtenfeld is co-head of our market-leading Real Estate Capital Markets and Real Estate Finance Groups and a founding member of our Private Equity Real Estate Group. He regularly advises real estate funds, REITs, sovereign wealth funds, institutional lenders, specialty lenders, hedge…

Steven L. Lichtenfeld is co-head of our market-leading Real Estate Capital Markets and Real Estate Finance Groups and a founding member of our Private Equity Real Estate Group. He regularly advises real estate funds, REITs, sovereign wealth funds, institutional lenders, specialty lenders, hedge funds, and pension advisors regarding public offerings and private placements of real estate-related debt and equity securities, real estate-related mergers and acquisitions, real estate preferred equity investments and joint ventures, real estate-related senior and mezzanine financings and other corporate, partnership and limited liability company matters.

Steven has been widely recognized as a driving force in the real estate capital markets and finance space during his more than thirty-five year career. He has garnered several prestigious accolades in this area, including receiving a coveted ranking from Chambers USA, which has described him as “a brilliant real estate attorney with experience in many asset classes.” Chambers has also described Steven as “highly analytical and highly strategic” and “encyclopedic in terms of his knowledge” in handling a broad spectrum of public and private debt offerings, M&A, joint venture and other corporate real estate matters. Steven is also recommended for Real Estate and REITs by Legal 500 United States and is consistently recognized as a leading real estate lawyer in Best Lawyers in America and Super Lawyers.

Photo of Matthew O'Loughlin Matthew O'Loughlin

Matthew O’Loughlin is a partner in the Corporate Department and is a member of the Mergers & Acquisitions Group. Matthew counsels clients on corporate, strategic and transactional matters, representing public and private companies, entrepreneurs, high-net worth families, investors, private equity groups and investment…

Matthew O’Loughlin is a partner in the Corporate Department and is a member of the Mergers & Acquisitions Group. Matthew counsels clients on corporate, strategic and transactional matters, representing public and private companies, entrepreneurs, high-net worth families, investors, private equity groups and investment banks. He acts as outside corporate counsel, advises boards of directors and assists companies with their day-to-day legal needs. This includes public and private securities offerings, mergers and acquisitions, joint ventures, and other strategic and complex transactions and liquidity events. He also advises clients on SEC reporting matters and corporate governance.

Matthew’s clients are principally in the life science/healthcare, food and beverage, health and wellness, consumer products, technology and entertainment industries. He also has particular experience in cross border transactions.

Photo of Ben Orlanski Ben Orlanski

Ben Orlanski is a partner in the Corporate Department and is a member of the Mergers & Acquisitions Group and the Capital Markets Group. Ben focuses on major corporate transactions and strategically solving critical business challenges. He has significant experience in securities and…

Ben Orlanski is a partner in the Corporate Department and is a member of the Mergers & Acquisitions Group and the Capital Markets Group. Ben focuses on major corporate transactions and strategically solving critical business challenges. He has significant experience in securities and public company representation; mergers and acquisitions; capital markets transactions; special committee, board of directors and general corporate representation; and corporate governance. His experience covers a wide range of industry sectors, including software-as-a-service, REITs, digital media, specialty manufacturing and consumer products.

Capital Formation and Securities

Ben has significant experience in managing, structuring and executing sophisticated securities and capital raising transactions. His approach reflects understanding of market operation, well-designed capital structure and the practical realities of the capital raising process. He represents public companies and investors in public offerings, registered direct transactions, self-tenders, warrant exchanges/flush transactions, recapitalizations, defensive strategies and secondary offerings. He also advises clients on corporate finance transactions for private businesses, ranging from venture capital and private placements to public offerings and debt restructurings.

Mergers and Acquisitions

Ben has completed scores of transactions representing buyers, sellers, investment bankers and financiers through all phases of the M&A process. He is actively involved in planning, structuring, negotiating and documenting strategic merger and acquisition transactions as well as dispositions of sophisticated enterprises.

General Counsel, Public Reporting and Strategic Advice

Ben acts as outside general counsel for numerous public and private companies, applying a business-like approach to produce practical legal solutions to both day-to-day and exceptional legal challenges. In representing his public clients, Ben has successfully guided the public reporting process for clients facing accounting and SEC challenges, proxy contests, cash flow issues, litigation, shareholder activism and strategic alternatives. He frequently advises on issues related to compliance with insider trading laws and major compliance challenges. He also represents boards of directors and special committees of public companies in special situations, including “interested” transactions, investigations, executive succession planning and sensitive corporate governance issues.

Photo of Antonio N. Piccirillo Antonio N. Piccirillo

Antonio N. Piccirillo is the head of the São Paulo office and a member of the Latin America Practice Group.

Antonio’s practice focuses principally on transactional and finance matters in Latin America. He has extensive experience in bank finance, securities law and corporate…

Antonio N. Piccirillo is the head of the São Paulo office and a member of the Latin America Practice Group.

Antonio’s practice focuses principally on transactional and finance matters in Latin America. He has extensive experience in bank finance, securities law and corporate governance (including Sarbanes-Oxley compliance), capital markets, project finance, debt restructurings (including tender offers, consent solicitations and exchange offers), securitizations and mergers & acquisitions.

While serving on the Fordham International Law Journal, Antonio authored “The Metamorphosis: Expected Changes in The Brazilian Debt-for-Nature Swap Process and Policy Implications,” and co-authored “A Citation Manual for European Community Materials.” In 2008, he authored a chapter titled, “Bridging the Gap – Recent SEC Initiatives to Ease Burdens on Foreign Private Issuers,” in International Business Transactions with Brazil.

Photo of Fabio Yamada Fabio Yamada

Fábio Yamada is a partner in the Latin America Practice Group. His practice focuses mainly on advisory, transactional and finance matters in Latin America. Fábio advises private equity and other alternative asset fund managers on a broad range of issues, including fund formations…

Fábio Yamada is a partner in the Latin America Practice Group. His practice focuses mainly on advisory, transactional and finance matters in Latin America. Fábio advises private equity and other alternative asset fund managers on a broad range of issues, including fund formations, co-investments and ongoing fund administrative matters. Fábio also advises institutional investors in investments in private investment funds and buy-side secondary transactions. Fábio has extensive experience in capital markets, banking, securitization and debt restructuring transactions. He also has represented acquirers and sellers in merger and acquisition transactions.

Fábio is actively involved in the private equity community in Brazil and frequently collaborates on projects with the Brazilian Private Equity and Venture Capital Association (ABVCAP) and its members.

Prior to joining Proskauer, Fábio worked as an international lawyer at Mayer, Brown, Rowe & Maw LLP. While in Brazil, he worked at the law firm of Machado, Meyer, Sendacz e Opice Advogados and at the legal departments of BankBoston (currently Itaú Unibanco), WestLB and NorChem (currently J.P. Morgan). In addition, Fábio was an invited member of the Legal Committee of the Brazilian Association of International Banks.

Photo of Frank Zarb Frank Zarb

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies…

Frank Zarb is a partner in our Corporate Department and a member of the Capital Markets Group, where he concentrates his practice on equity finance and a wide range of regulatory matters under U.S. federal securities laws.

He counsels public and private companies, hedge funds and family offices, and market intermediaries and other financial institutions on a wide range of transactional and securities regulatory compliance matters including:

  • Equity investments and dispositions in public and private companies
  • Public company registration, disclosures and preparation of periodic reports
  • Tender offers, equity lines, proxy contests, SPACs, and other highly regulated transactions
  • Regulation M, Regulation SHO, Forms 13F and 13H, insider trading and other trading issues
  • Corporate governance and stock exchange listing standards
  • Federal and state proxy requirements as well as shareholder proposals and communications
  • Regulation of financial intermediaries, including trading of public and private equity, and complex and novel trading structures
  • Advocating with the SEC on behalf of a market intermediary related to back-office processing matters.

Frank’s practice is both domestic and international, beginning with his experience in senior positions with the Securities and Exchange Commission. As a member of the staff of the SEC’s Office of International Corporate Finance, Frank advised U.S. companies seeking to do business in the EU, Asia and the Middle East, as well as companies from those regions doing business in the U.S., or otherwise seeking to comply with the U.S. securities laws.  In the Office of Chief Counsel, he focused on federal proxy rules, and supervised a team of staff members that provided guidance in the course of proxy season.

Prior to joining the Firm, Frank was deputy general counsel/chief securities counsel for Bristol Myers Squibb Co. in a new position required by the SEC. Prior to joining Bristol-Myers, Frank was a corporate partner with Morgan, Lewis & Brockius.

Social Responsibility

Frank is a Trustee of the Gerald R. Ford Presidential Foundation, and he provides significant pro bono assistance to non-profit social service institutions in the Washington, D.C. area.

Photo of Louis Rambo Louis Rambo

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and…

Louis Rambo is a partner in the Corporate Department and a member of the Capital Markets Group. He focuses his practice on counseling public companies and their boards of directors on corporate governance, capital markets transactions, mergers and acquisitions, securities regulation, disclosure and shareholder activism. Prior to joining the Firm, Louis served as an attorney in the Division of Corporation Finance with the Securities and Exchange Commission.