Brief of Amicus Curiae Professor Sean J. Griffith in Alliance for Fair Board Recruitment, National Center for Public Policy Research V. Sec, No. 21-60626 (Fifth Cir., Mar. 27, 2024).

Abstract

This amicus brief explains how First Amendment doctrine applies to the Nasdaq Board Diversity Rules. It argues, first, that there is no special standard of deference for securities regulation under the First Amendment. Rather, application of a lesser standard of judicial review depends upon whether the regulation meets the requirements of the commercial speech doctrine. Under that doctrine, less exacting scrutiny is available for mandatory disclosures only if both (1) the disclosure rule is aimed at preventing consumers from being misled and (2) the resulting disclosures are “purely factual and uncontroversial.”

The Board Disclosure Rules satisfy neither of these tests. First, the Rules are not aimed at preventing consumers from being misled. Second, the disclosures called forth by the rules are not uncontroversial. Instead, they thrust corporations into contentious debates over questions of race, gender, and sexual orientation. Additionally, the disclosures are controversial by reference to the basic purpose of the commercial speech paradigm, which seeks to protect consumers, or, in the context of securities regulation, investors.

Having failed to qualify for less exacting scrutiny under the commercial speech paradigm, the Board Diversity Rules should be judged under the standard of strict scrutiny. Strict scrutiny is the appropriate standard because the rules target ideological expression, the core interest protected by the First Amendment, and because the rules engage in viewpoint discrimination. But the Board Diversity Rules would fail even under the commercial speech doctrine’s standard of intermediate scrutiny.

Keywords: First Amendment, securities regulation, SEC, Nasdaq, Board Diversity, compelled speech