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URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3Ae600a8bf31c2867e

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

June 12, 2026
Via Electronic Mail (Secretarys-Office@SEC.gov)
Secretary Vanessa Countryman
Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549-1090
Re:

Petition for Rulemaking to Rescind and Amend Item 407(c)(2)(vi) of
Regulation S-K (17 C.F.R. § 229.407(c)(2)(vi)); to Amend Item 11(k) of
Form S-1 (17 C.F.R. § 239.11) and Parallel Corporate Governance Line
Items in Forms S-11, F-1, and 10; and to Rescind Related SEC Staff
Compliance and Disclosure Interpretations
SUMMARY OF PETITION

1. America First Legal Foundation (“AFL”) respectfully petitions the Securities and
Exchange Commission (the “Commission” or “SEC”), pursuant to 5 U.S.C. §
553(e)1 and 17 C.F.R. § 201.192,2 to initiate notice-and-comment rulemaking to:
a. rescind the diversity disclosure mandates under Item 407(c)(2)(vi) of
Regulation S-K, codified at 17 C.F.R. § 229.407(c)(2)(vi),3 and amend that
provision with a certification requirement attesting that
i. race, sex, gender, ethnicity, religion, nationality, disability, sexual
orientation, cultural background, socio-economic or demographic
characteristics, or proxies for these characteristics were not

1 Section 553(e) provides that “[e]ach agency shall give an interested person the right to petition for

the issuance, amendment, or repeal of a rule.”

2 Petition for Rulemaking regulation specific to the SEC.

17 C.F.R. § 229.407(c)(2)(vi) (“Describe the nominating committee’s process for identifying and
evaluating nominees for director, including nominees recommended by security holders, and any
differences in the manner in which the nominating committee evaluates nominees for director based
on whether the nominee is recommended by a security holder, and whether, and if so how, the
nominating committee (or the board) considers diversity in identifying nominees for director. If the
nominating committee (or the board) has a policy with regard to the consideration of diversity in
identifying director nominees, describe how this policy is implemented, as well as how the nominating
committee (or the board) assesses the effectiveness of its policy;”).

3

611 Pennsylvania Ave SE #231 | Washington, DC 20003 | www.aflegal.org

considered, directly or indirectly, in any aspect of director
nomination or selection, and
ii. no policy, target, quota, or metric based on those characteristics was
applied in the nomination process;
b. amend Item 11(k) of Form S-1 (17 C.F.R. § 239.11), used by domestic
issuers for initial public offerings—and the parallel corporate governance
line items in Form S-11 (17 C.F.R. § 239.18), used by real estate companies,
Form F-1 (17 C.F.R. § 239.31), used by foreign private issuers, and Form
10 (17 C.F.R. § 249.210), used for Exchange Act registration by domestic
companies not offering securities—to cross-reference the revised Item
407(c)(2)(vi), so that the new certification requirement applies to initial
public offering and other initial registration statements;
c. rescind SEC Staff Compliance and Disclosure Interpretations Item 401
Question 116.11 and Item 407 Question 133.13, which opine on selfidentified diversity characteristics disclosures; and
d. direct all self-regulatory organizations to remove any rules that mandate
consideration of race, sex, gender, ethnicity, religion, nationality,
disability, sexual orientation, cultural background, socio-economic or
demographic characteristics, or proxies for these characteristics in board
nominations, selections, or proxy disclosures.
2. AFL petitions the SEC to initiate rulemaking proceedings to replace the current
language of 17 C.F.R. § 229.407(c)(2)(vi) as provided below (added text in bold):
Include in any registration statement, proxy statement,
information statement, or annual report in which the registrant
is required to describe the director nomination process,
including any registration statement filed in connection with an
initial public offering, a certification attesting that
(A) neither the nominating committee nor the board of
directors, nor any person acting on their behalf,
considered race, sex, gender, ethnicity, religion,
nationality, disability, sexual orientation, cultural
background,
socio-economic
or
demographic
characteristics, or proxies for these characteristics,
directly or indirectly, in any aspect of identifying,
evaluating, recruiting, nominating, or selecting any
candidate for election to the board of directors; and

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(B) no policy, target, quota, aspiration, or metric based on
race, sex, gender, ethnicity, religion, nationality,
disability, sexual orientation, cultural background, socioeconomic or demographic characteristics, or proxies for
these characteristics was applied, maintained, or
referenced in the nomination process.
3. AFL’s petition for rulemaking also proposes amending Item 11(k) of Form S-1 (17
C.F.R. § 239.11),4 the standard registration form for domestic initial public
offerings, to require a cross-reference to the revised Item 407(c)(2)(vi). AFL urges
the Commission to amend part (k) under Item 11 of Form S-1 as follows (added
text in bold):
(k) Information required by Item 401 of Regulation S-K (§229.401 of this
chapter), directors and executive officers, and information required
by Item 407 (c)(2)(vi) of Regulation S-K (§ 229.407(c)(2)(vi) of this
chapter);
4. AFL proposes parallel amendments to the SEC Forms as provided below (added
text in bold):
a. Item 21 of Form S-11 (17 C.F.R. § 239.18),5 the registration statement form
used by real estate investment trusts and other real estate companies, to
add a cross-reference to Item 407(c)(2)(vi) of Regulation S-K (§
229.407(c)(2)(vi)) as follows:
Furnish the information required by Item 401 of Regulation SK (§229.401 of this chapter), and information required by
Item 407 (c)(2)(vi) of Regulation S-K (§ 229.407(c)(2)(vi)
of this chapter).
b. Item 6 of Form F-1 (17 C.F.R. § 239.31),6 the registration statement form
used by foreign private issuers for initial public offerings in the United
States, to add a cross-reference to Item 407(c)(2)(vi) of Regulation S-K (§
229.407(c)(2)(vi)) as follows:
Furnish the information required by Item 702 of Regulation SK (§229.702 of this chapter), and information required by
4 Form S-1, U.S. SECURITIES AND EXCHANGE COMMISSION https://perma.cc/KSE9-PQNB.

5 Form S-11, U.S. SECURITIES AND EXCHANGE COMMISSION https://perma.cc/H453-PR8C.
6 Form F-1, U.S. SECURITIES AND EXCHANGE COMMISSION https://perma.cc/MHP2-ST8V.

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Item 407 (c)(2)(vi) of Regulation S-K (§ 229.407(c)(2)(vi)
of this chapter).
c. Item 5 of Form 10 (17 C.F.R. § 249.210),7 the Exchange Act registration
form used by domestic companies becoming reporting issuers without a
public offering, to add a cross-reference to Item 407(c)(2)(vi) of Regulation
S-K (§ 229.407(c)(2)(vi)) as follows:
Furnish the information required by Item 401 of Regulation SK (§229.401 of this chapter), and information required by
Item 407 (c)(2)(vi) of Regulation S-K (§ 229.407(c)(2)(vi)
of this chapter).
5. These amendments would ensure that the revised certification requirement in
Item 407(c)(2)(vi) applies uniformly to initial registration statements under the
Securities Act and the Exchange Act.
6. AFL further requests that the proposed rulemaking provide a basis for liability
under the Commission’s authority to investigate and initiate proceedings for any
false or misleading statement of material fact in certifications or related
disclosures required under the revision to 17 C.F.R. § 229.407(c)(2)(vi). With
respect to Form S-1 and other registration statements, misstatements in the
proposed certification would be actionable under Section 11 of the Securities Act
of 1933, 15 U.S.C. § 77k, which imposes strict liability on issuers for material
misstatements in registration statements, and under Section 12(a)(2) of the
Securities Act, 15 U.S.C. § 77l(a)(2), which provides a cause of action for material
misstatements in prospectuses and oral communications. With respect to postIPO proxy disclosures, liability would attach under Section 14(a) of the Securities
Exchange Act of 1934 and Rule 14a-9 for material misstatements or omissions in
proxy solicitations.
7. AFL urges the Commission to direct all self-regulatory organizations (“SROs”),
such as The Nasdaq Stock Market LLC and the New York Stock Exchange LLC,
to amend their rules within 180 days of the effective date of this rule to remove
any provision that requires, incentivizes, or otherwise encourages consideration
of race, sex, gender, ethnicity, religion, nationality, disability, sexual orientation,
cultural background, socio-economic or demographic characteristics, or proxies for
these characteristics in board nominations, director selections, committee
compositions, or proxy disclosures. Any such self-regulatory organization rules
7 Form 10, U.S. SECURITIES AND EXCHANGE COMMISSION https://perma.cc/NCX4-NCKJ.

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that conflict with the revised language of 17 C.F.R. § 229.407(c)(2)(vi) shall be
deemed inconsistent with Section 6(b)(5) of the Exchange Act, 15 U.S.C. §
78f(b)(5), and shall be removed.
8. Publicly traded corporations exist to maximize long-term shareholder value.
Achieving this objective requires selecting competent leadership based on merit.
Regulatory mandates compelling speech on “diversity” pressure boards to adopt
identity-based selection criteria and undermine the meritocratic principles
foundational to corporate governance. The Commission’s current diversity
disclosure mandate in Item 407(c)(2)(vi) creates inefficiencies in capital allocation,
thereby disrupting the core function of shareholder primacy. The Commission
should rescind this mandate as set forth herein.
I.

Statement of Interest

9. AFL is a national 501(c)(3) nonprofit organization dedicated to defending the
constitutional rights of American citizens, upholding the rule of law, and ensuring
that the federal government does not enforce regulatory mandates for identitybased preferencing.
10. AFL has a record of litigation and advocacy challenging racially discriminatory,
identity-based practices imposed on private companies, government contractors,
and across the federal government.8 AFL’s mission encompasses efforts to ensure
that independent regulatory agencies, such as the SEC, do not use disclosure
mandates, compliance frameworks, or approvals of SRO rules to require and ratify
practices that consider race, sex, gender, ethnicity, religion, nationality, disability,
sexual orientation, cultural background, socio-economic or demographic
characteristics, or proxies for these characteristics as criteria in employment,
governance, or board member nomination and selection decisions.
11. Because the SEC’s disclosure rules directly shape corporate governance practices
and the information provided to shareholders, Item 407(c)(2)(vi) pressures public
companies to use protected traits as criteria for board nominations and hiring.

8 See, e.g., Miller v. Bausch Health Cos., No. 1:25-cv-25890 (S.D. Fla. filed Dec. 15, 2025) (challenging

racial quota imposed on corporate board appointments); Craig v. Target Corp., No. 2:23-cv-00599 (M.D.
Fla. filed Aug. 8, 2023) (securities fraud action challenging corporate DEI practices); AM. FIRST LEGAL
FOUND., America First Legal Petitions U.S. Department of Energy to Rescind Biden-Era Regulation
Mandating Illegal DEI Discrimination in Federal Contracting (Jan. 7, 2026) https://perma.cc/S6ZYSS7X. See also AM. FIRST LEGAL FOUND., Dismantling DEI, https://perma.cc/RE2F-6LE7.

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AFL has a direct interest in ending government-mandated consideration of
identity characteristics so that corporate America is free to select directors based
on merit for the benefit of all shareholders. AFL also has a substantial interest in
ensuring that the Commission’s disclosure regime governing initial public offering
registration statements does not pressure pre-IPO boards to consider race, sex,
gender, ethnicity, religion, nationality, disability, sexual orientation, cultural
background, socio-economic or demographic characteristics, or proxies for these
characteristics in selecting initial directors as a condition of accessing the public
capital markets.
II.

Background

12. Regulation S-K (17 C.F.R. § 229) serves as the SEC’s “central repository for [filer]
disclosure requirements outside of the financial statements.”9 Item 407 of
Regulation S-K addresses corporate governance matters, including board
committees and director independence. Item 407(c) addresses the nominating
committee and the director nomination process, requiring specified disclosures
about how candidates are identified, evaluated, and selected.
13. On December 16, 2009, the Obama-era Commission adopted amendments to its
disclosure rules through the “Proxy Disclosure Enhancements” rulemaking.10 The
stated purpose of the amendments was to “enhance the information provided in
annual reports and proxy statements to better enable shareholders to evaluate
the leadership of public companies.”11
14. As part of that rulemaking, the Commission amended Item 407(c)(2)(vi) to require
new disclosure about how “diversity” is considered in the director nomination
process. The amended text requires issuers to describe the nomination process,
state “whether, and if so how, the nominating committee (or the board) considers
diversity in identifying nominees for director,” and, if a diversity “policy” exists,
describe its implementation and assess its effectiveness.12
15. Critically, Item 407(c)(2)(vi) does not define “diversity.” In the final rule, the
Commission stated that it would permit companies to “define diversity in ways
9 Paul S. Atkins, Chairman, Statement on Reforming Regulation S-K, U.S. SEC. & EXCH. COMM’N

(Jan. 13, 2026), https://perma.cc/MSW3-L9FW.

10 Proxy Disclosure Enhancements, 74 Fed. Reg. 68334 (Dec. 23, 2009).
11 Id.

12 See id.; 17 C.F.R. § 229.407(c)(2)(vi).

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that they consider appropriate.”13 This deliberate vagueness has produced a
landscape in which some issuers interpret “diversity” to encompass differences in
viewpoint, professional experience, and skills, while others focus explicitly on race,
gender, ethnicity, and other demographic characteristics. The latter represents
precisely the protected traits that federal civil-rights law and the United States
Constitution prohibit from being used as selection criteria.
16. On February 6, 2019, the SEC staff issued two identical Compliance and
Disclosure Interpretations (“C&DIs”) that apply to Item 401 of Regulation S-K,
Question 116.11, and Item 407 of Regulation S-K, Question 133.13.14 The
interpretations provide guidance on disclosure when a director or director
nominee voluntarily provides self-identified diversity characteristics, such as race,
sex, gender, ethnicity, religion, nationality, disability, sexual orientation, cultural
background, socio-economic or demographic characteristics, or proxies for these
characteristics, and has consented to their disclosure.15 The staff opined that (1)
Item 401(e) of Regulation S-K requires a brief discussion of the specific experience,
qualifications, attributes, or skills that led to the conclusion that a person should
serve as a director, and (2) Item 407(c)(2)(vi) of Regulation S-K requires a
description of how a board implements any policies it follows with regard to the
consideration of diversity in identifying director nominees.16 In consideration of
these requirements, the staff explained:
“[t]o the extent a board or nominating committee in determining the
specific experience, qualifications, attributes, or skills of an individual
for board membership, has considered the self-identified diversity
characteristics referred to above . . . , we would expect that the
company’s discussion required by Item 401 would include, but not
necessarily be limited to, identifying those characteristics and how they
were considered. Similarly, in these circumstances, we would expect any
description of diversity policies followed by the company under Item 407
would include a discussion of how the company considers the selfidentified diversity attributes of nominees as well as any other
qualifications its diversity policy takes into account, such as diverse

13 74 Fed. Reg. 68344.
14 See DIVISION OF CORPORATION FINANCE, Regulation S-K Compliance and Disclosure Interpretations

(last updated Mar. 6, 2026), https://perma.cc/4CTN-Q3ZK (Questions 116.11 and 133.13).
14 Id.
15 Id.
16 Id.

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work experiences, military service, socio-economic or demographic
characteristics, or proxies for these characteristics.”17
17. Although Item 407(c)(2)(vi) applies to proxy statements filed on Schedule 14A and
annual reports on Form 10-K, the provision does not currently apply to most initial
public offering registration statements. Item 11(k) of Form S-1 (17 C.F.R. § 239.11)
incorporates only Item 407(a) of Regulation S-K (director independence), not Item
407(c)(2)(vi). This creates a regulatory gap: a pre-IPO board may consider
protected traits such as race, sex, gender, ethnicity, religion, nationality,
disability, sexual orientation, cultural background, socio-economic or demographic
characteristics, or proxies for these characteristics in director selection without
any corresponding SEC line-item disclosure obligation in the registration
statement. At the same time, the SEC’s C&DIs at Item 401 Question 116.11 and
Item 407 Question 133.13 incorporate the self-identified diversity characteristics
into the Item 401(e) qualifications required in Form S-1, thereby pressuring
issuers to disclose self-identified characteristics without any certification that
protected traits were not considered as selection criteria.
III.

Item 407(c)(2)(vi) Conflicts with Federal Civil-Rights Law and Current
Executive Policy

18. The diversity disclosure mandate in Item 407(c)(2)(vi) should be rescinded because
it exceeds the Commission’s statutory authority, which is confined to prescribing
rules “necessary or appropriate in the public interest or for the protection of
investors.”18 The mandate conflicts with Title VII of the Civil Rights Act of 1964,
which makes it an unlawful employment practice “to limit, segregate, or classify .
. . employees or applicants for employment in any way which would deprive or
tend to deprive any individual of employment opportunities or otherwise
adversely affect his status as an employee, because of such individual’s race, color,
religion, sex, or national origin.”19 Title VII also makes it unlawful for an employer
to “fail or refuse to hire or to discharge any individual, or otherwise to discriminate
against any individual with respect to his compensation, terms, conditions, or
privileges of employment, because of such individual’s race, color, religion, sex, or
national origin.”20 Title VII further provides that nothing therein “shall be
interpreted to require any employer . . . to grant preferential treatment to any
17 Id.

18 15 U.S.C. § 78n(a)(1).

19 42 U.S.C. § 2000e-2(a)(2).
20 42 U.S.C. § 2000e-2(a)(1).

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individual or to any group because of the race, color, religion, sex, or national
origin of such individual or group on account of an imbalance which may exist”
with respect to the representation of such groups in the employer’s workforce.21
19. The Supreme Court of the United States recently made clear, “As a textual matter,
Title VII’s disparate-treatment provision draws no distinctions between majoritygroup plaintiffs and minority-group plaintiffs. Rather, the provision makes it
unlawful ‘to fail or refuse to hire or to discharge any individual, or otherwise to
discriminate against any individual with respect to his compensation, terms,
conditions, or privileges of employment, because of such individual’s race, color,
religion, sex, or national origin.’”22
20. The United States Constitution, applicable statutory text, and Title VII are clear:
racial, ethnic, and sex considerations in hiring, training, compensation, and
promotion are patently unlawful.23 Such practices are inherently and profoundly
harmful.24 Discrimination based on characteristics such as race, color, national
origin, or sex “generates a feeling of inferiority as to their status in the community
that may affect their hearts and minds in a way unlikely to ever be undone.”25
More broadly, discrimination “on the basis of race” is “odious and destructive.”26
Furthermore, the Supreme Court of the United States makes explicit that
“[d]istinctions between citizens solely because of their ancestry are by their very
nature odious to a free people whose institutions are founded upon the doctrine of
equality.”27 It truly “is a sordid business, this divvying us up” by race or sex.28
21. Item 407(c)(2)(vi) creates regulatory pressure to adopt and defend selection
practices that consider protected traits by compelling issuers to disclose their
21 42 U.S.C. § 2000e-2(j).

22 Ames v. Ohio Dep’t of Youth Servs., 605 U.S. 303, 309–10 (2025) (citing 42 U.S.C. § 2000e–2(a)(1))

(emphasis in original).

23 See 42 U.S.C. § 2000e-2(a), (d), and (m); see also United Steelworkers of Am. v. Weber, 443 U.S. 193,

208 (1979); Johnson v. Transp. Agency, 480 U.S. 616, 621–41 (1987); see also Bostock v. Clayton Cnty.,
Ga., 590 U.S. 644 (2020).
24 Compare 42 U.S.C. § 2000e-2, with 42 U.S.C. § 1981. Our civil rights laws “promote hiring on the
basis of job qualifications, rather than on the basis of race or color,” or sex, or national origin, or
religion. See Ricci v. DeStefano, 557 U.S. 557, 582 (2009); McDonald v. Santa Fe Trail Transp. Co.,
427 U.S. 273, 279 (1976). Racial discrimination is invidious in all contexts. Students for Fair
Admissions, Inc. v. President & Fellows of Harvard Coll., 600 U.S. 181, 214 (2023).
25 Brown v. Bd. of Educ., 347 U.S. 483, 494 (1954).
26 Texas v. Johnson, 491 U.S. 397, 418 (1989).
27 Students for Fair Admissions, 600 U.S. at 208 (quoting Rice v. Cayetano, 528 U.S. 495, 517 (2000)).
28 League of United Latin Am. Citizens v. Perry, 548 U.S. 399, 511 (2006) (Roberts, C.J., concurring in
part).

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consideration of “diversity”—a term that in practice frequently encompasses race,
sex, and other demographic characteristics. This pressure operates in direct
conflict with Title VII’s prohibition on discrimination “because of” race or sex and
its express instruction that the statute does not require preferential treatment
based on demographic imbalances. It is also inconsistent with current federal
policy under Executive Order 14173, “Ending Illegal Discrimination and
Restoring Merit-Based Opportunity,” which directs federal agencies to eliminate
illegal DEI preferences.29 A disclosure mandate that predictably induces
consideration of protected traits as criteria in director selection is inconsistent
with the statutory prohibition on such consideration under Title VII,
nondiscrimination law, and current federal policy.
IV.

Statutory Authority for the Proposed Rulemaking

22. Section 14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) makes
it unlawful for any person to solicit proxies “in contravention of such rules and
regulations as the Commission may prescribe as necessary or appropriate in the
public interest or for the protection of investors.”30
23. The phrase “public interest” in Section 14(a) is constrained by the specific
purposes of the Exchange Act. Section 3(f) of the Exchange Act, 15 U.S.C. § 78c(f),
directs the Commission, whenever it is “engaged in rulemaking” and “is required
to consider or determine whether an action is necessary or appropriate in the
public interest,” to “consider, in addition to the protection of investors, whether
the action will promote efficiency, competition, and capital formation.” Section 2(b)
of the Securities Act, 15 U.S.C. § 77b(b), contains a parallel directive.31 Together,
these provisions confirm that Congress defined the “public interest” for securitiesregulation purposes in financial and market-integrity terms, not as an open-ended
license to advance contested social-policy objectives, including the consideration
of diversity.

29 Exec. Order No. 14173, 90 Fed. Reg. 8633 (Jan. 31, 2025).

30 Securities Exchange Act of 1934 § 14(a), Pub. L. No. 73-291, 48 Stat. 881 (codified as amended at 15

U.S.C. § 78n(a)).
31 Securities Act of 1933 § 2(b), Pub. L. No. 73-22, 48 Stat. 74 (codified as amended at 15 U.S.C. §

77b(b)) (“Whenever pursuant to this subchapter the Commission is engaged in rulemaking and is
required to consider or determine whether an action is necessary or appropriate in the public interest,
the Commission shall also consider, in addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation.”).

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24. Courts have reinforced this constraint. In Business Roundtable v. SEC, the D.C.
Circuit rejected an expansive reading of the Commission’s authority and held that
the SEC’s rulemaking must align with the purposes Congress had in mind in
enacting the legislation.32 More recently, in Alliance for Fair Board Recruitment
v. SEC, the Fifth Circuit, sitting en banc, applied the canons of noscitur a sociis
and ejusdem generis to interpret the public-interest provision. The court held that
the term “public interest” is defined by reference to the specific harms the
Exchange Act was enacted to address, namely “speculation, manipulation, fraud,
and removing barriers to exchange competition,” and does not extend to matters
unrelated to those core purposes.33
25. Accordingly, the Commission’s proxy rulemaking authority is limited to
prescribing requirements only where they are “necessary or appropriate” for the
defined statutory purposes of investor protection, market integrity, and capital
formation.
26. The Exchange Act further provides general rulemaking authority in Section 23(a),
authorizing the Commission to “make such rules and regulations as may be
necessary or appropriate to implement the provisions of” the Act and “for the
execution of the functions vested” in the Commission.34 Further, when “making
rules and regulations,” the Commission “shall consider among other matters the
impact any such rule or regulation would have on competition,” including
“reviewing any proposed rule change of a self-regulatory organization.”35
27. To the extent Item 407 applies through Securities Act filings, the Securities Act of
1933 similarly authorizes the Commission to “make, amend, and rescind such
rules and regulations as may be necessary to carry out the provisions of” that
Act.36
28. Section 7 of the Securities Act of 1933, 15 U.S.C. § 77g, authorizes the Commission
to prescribe the form and content of registration statements, and Section 19(a) of
the Securities Act, 15 U.S.C. § 77s(a), grants the Commission general rulemaking
authority to amend registration forms. The proposed amendment to Item 11(k) of
Form S-1—and the parallel amendments to Forms S-11, F-1, and 10—is a routine
32 905 F.2d 406 (D.C. Cir. 1990).

33 125 F.4th 159, 169 (5th Cir. 2024) (en banc).
34 15 U.S.C. § 78w(a).
35 Id.

36 15 U.S.C. § 77s(a).

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exercise of the Commission’s longstanding form-amending authority to
incorporate updated Regulation S-K line items into registration statements.
Similarly, Section 23(a) of the Exchange Act, 15 U.S.C. § 78w(a), supports parallel
amendments to require the certification in Exchange Act registration statements.
None of these amendments raises a major question; each is an incremental
conforming change that extends a disclosure requirement the Commission already
has authority to prescribe under Regulation S-K.
V.

The Commission’s Authority to Direct SROs

29. The Commission has the statutory authority to rescind rules that are no longer
justified. The statutory provisions that authorize the Commission to promulgate
rules “necessary or appropriate” for investor protection and market integrity
necessarily encompass the authority to urge SROs to amend or rescind rules that
fail to meet the same standard.
30. With respect to SROs, Section 19(b)(2) of the Exchange Act, 15 U.S.C. § 78s(b)(2),
provides that the Commission “shall approve” a proposed SRO rule change only if
it finds the proposal consistent with the Exchange Act’s requirements and “shall
disapprove” any proposal that fails to meet those requirements.37 The Exchange
Act further requires that the rules of a national securities exchange “are not
designed to permit unfair discrimination.”38 Following the Exchange Act and the
holding in Alliance, the Commission should direct all SROs to remove any
remaining rules that require or incentivize consideration of race, sex, gender,
ethnicity, religion, nationality, disability, sexual orientation, cultural background,
socio-economic or demographic characteristics, or proxies for these characteristics
in board member selection.
VI.

The Current Regulation Exceeds the Statutory Purpose of Investor
Protection and Market Integrity

31. The Commission’s proxy rulemaking power under Section 14(a) is not a generalpurpose authority to compel corporate speech on contentious social or political
subjects. It is limited to prescribing rules that are “necessary or appropriate in the
public interest or for the protection of investors.”39 That statutory phrase
constrains the Commission to mandating disclosures that bear a direct nexus to
37 15 U.S.C. § 78s(b)(2)(C)(i)–(ii).
38 15 U.S.C. § 78f(b)(5).

39 15 U.S.C. § 78n(a)(1).

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the enumerated purposes of the Exchange Act: investor protection, market
integrity, and the prevention of fraud.
32. The United States Court of Appeals for the Fifth Circuit, sitting en banc,
confirmed this principle in Alliance for Fair Board Recruitment v. SEC.40 The
Fifth Circuit rejected the SEC’s argument that board diversity rules were
sufficiently “related to” the purposes of the Exchange Act, holding that such rules
are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law.”41 The court vacated the SEC’s approval of Nasdaq’s board diversity
rules, concluding “that the diversity rules cannot be squared with the Securities
Exchange Act of 1934.”42
33. The Alliance court applied the major questions doctrine, reasoning that because
the SEC “has no inherent or implied authority” on its own, the agency’s “powers
to make major decisions must come only from unequivocal statutory text.”43 The
court characterized the SEC’s approval of diversity-based disclosure rules as a
significant action “far outside” the SEC’s “ordinary domain,” requiring clear
congressional authorization that the Commission could not identify.44
34. The reasoning of Alliance applies with equal force to Item 407(c)(2)(vi). Both the
Nasdaq diversity rules and Item 407(c)(2)(vi) compel disclosure of diversity
information in the context of board composition and director nominations. Both
lack any direct nexus to fraud prevention, market integrity, or the financial
performance metrics that investors require to make informed capital-allocation
decisions. If the SEC lacked authority to approve Nasdaq’s disclosure and
diversity rules, then the Commission likewise lacks authority to maintain its own
diversity-specific disclosure mandate. The same analysis applies at the IPO stage:
extending Item 407(c)(2)(vi) to Form S-1 in its current form would perpetuate the
same lack of statutory nexus in the registration statement context, where Section
11 strict liability attaches to material misstatements.

40 125 F.4th 159 (5th Cir. 2024) (en banc).
41 Id. at 168.
42 Id. at 164.
43 Id. at 181.
44 Id.

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VII.

Protected-Trait Disclosures Harm Shareholders

35. Item 407(c)(2)(vi) compels issuers to describe how protected traits such as race
and sex are considered in recruiting and nominating directors. This occurs
because “diversity” is frequently understood through the lens of race and sex.
Issuers that disclose a “diversity policy” and describe its “implementation” and
“effectiveness” are effectively required to publish statements about the role of
race, sex, and other demographic characteristics in governance decisions.
36. This disclosure regime creates legal risk for issuers. Any issuer that describes
consideration of race or sex as a factor in board nominations may face liability
under Title VII, state civil-rights statutes, and the Equal Protection Clause (for
state actors), as illustrated by AFL’s actions against multiple publicly traded
companies. For example, AFL formally requested that the Equal Employment
Opportunity Commission and the Tennessee Attorney General investigate
Cracker Barrel Old Country Store, Inc., after the company’s 2024 proxy statement
disclosed that its Nominating and Corporate Governance Committee “considers,
among other things . . . diversity of age, gender, race and ethnic background” in
evaluating potential candidates for the Board of Directors, thereby treating
protected characteristics as explicit selection criteria.45 Likewise, AFL filed a
federal civil-rights complaint with the EEOC against Shake Shack, Inc., citing the
company’s May 2023 proxy statement, which established “5-Year Diversity
Targets” focused on “women and people of color” for leadership roles and declared
that the Board’s “overall diversity” is a “significant consideration in the director
nomination process,” with explicit tracking of race, ethnicity, and gender
identity.46 These actions demonstrate the exposure issuers incur when proxy
disclosures or related policies reference protected-trait considerations in board
selection.
37. Moreover, issuers that omit or inadequately disclose known material risks arising
from diversity initiatives may face securities litigation under federal securities
laws. This is illustrated by AFL’s opposition to Target Corporation’s motion to
dismiss in Craig v. Target Corp., where the court permitted claims to proceed
based on allegations that the company made materially misleading statements in
45 See AM. FIRST LEGAL FOUND., America First Legal Calls for Federal and State Investigations into

Cracker Barrel Over Unlawful and Discriminatory Employment Practices (July 21, 2025),
https://perma.cc/D65R-TF5N.
46 See AM. FIRST LEGAL FOUND., America First Legal Files Federal Civil Rights Complaint Against
Shake Shack For Illegal Race and Sex Discrimination (Apr. 25, 2024), https://perma.cc/ZE6G-UCNK.

14

its proxy materials by failing to disclose the specific risks of adverse customer
reactions and financial losses from its ESG and DEI initiatives.47
38. Any issuer that fails to disclose such “diversity” consideration in board
nominations and selections, or that describes an insufficient commitment to
“diversity,” may face activist pressure, proxy campaigns, and litigation alleging
inadequate disclosure. The Commission should not maintain a rule that subjects
registrants to this regulatory pitfall, particularly where the disclosure serves no
cognizable investor-protection purpose and aims only to serve contestable social
objectives.
VIII. The Commission Should Not Compel Disclosure to Advance Social
Policy Goals
39. The SEC’s investor-protection mandate does not extend to compelling corporate
speech on contested social-policy questions. Regardless of pressure from policy
advocates, the Commission may not use its disclosure authority to advance
objectives unrelated to financial performance, corporate governance, or a
company’s risk profile. The diversity mandate represents an impermissible
encroachment by the Commission into social policy.
40. Removing the diversity-specific mandate would leave issuers free to describe, in
their proxy statements or other filings, any factors they consider relevant to
director nominations, including viewpoint diversity, professional experience,
industry expertise, and other attributes relevant to corporate performance.
Rescission would reinstate identity-neutral board member nominations and
selections based on relevant metrics for increasing shareholder value.
IX.

The Diversity Mandate Undermines Merit-Based
Governance Necessary for Efficient Capital Markets

Corporate

41. Publicly traded corporations are structured to maximize long-term shareholder
value. Settled principles of corporate law establish that the board of directors owes
the fiduciary duties of care and loyalty to the corporation and its shareholders—
duties that require selecting the most competent individuals to serve as directors
47 See AM. FIRST LEGAL FOUND., VICTORY — U.S. District Court Denies Target’s Attempt to Dismiss

America First Legal Lawsuit and Transfer Venue; Shareholder Action Against Undisclosed Risks and
Losses Caused by Target’s ESG, DEI, and LGBTQ “Pride Campaign” to Continue (Dec. 4, 2024),
https://perma.cc/T72A-L5XW.

15

and officers.48 The shareholder primacy model underpinning corporate governance
holds that boards must deploy capital and select leadership with a focus on
maximizing risk-adjusted returns. Efforts to advance subjective social policy goals
extraneous to financial performance fall outside this framework.
42. A regulatory mandate that compels or incentivizes consideration of race, sex,
gender, ethnicity, religion, nationality, disability, sexual orientation, cultural
background, socio-economic or demographic characteristics, or proxies for these
characteristics in the director nomination process substitutes identity metrics for
competence. This distorts capital allocation by diverting board selection from the
merit-based criteria that shareholders rely upon to protect their investments, such
as industry expertise, financial acumen, strategic judgment, and operational
experience. The result is straightforward: shareholders bear the cost of compliance
with diversity disclosure requirements, while value creation takes a backseat to
identity-based considerations. These concerns are heightened at the IPO stage,
when the issuer first accesses the public capital markets, and Section 11 of the
Securities Act imposes strict liability on the issuer for any material misstatement
in the registration statement. Investors making initial capital-allocation decisions
at the IPO are entitled to a meritocratic governance disclosure framework—not
one that pressures identity-based board composition as a condition of market
access.
43. Item 407(c)(2)(vi), by compelling issuers to disclose “whether, and if so how” they
consider diversity in nominations and to describe any “diversity policy” and assess
its “effectiveness,” operates as a regulatory signal that issuers are encouraged to
adopt such policies. The practical effect is to encourage boards to adopt identitybased selection metrics, thereby undermining the market-efficiency principles the
Exchange Act was designed to safeguard.
44. The now-vacated Nasdaq Rules 5605(f) and 5606 illustrate the same problem in
the SRO context. Those rules required listed companies either to satisfy specified
demographic targets for board composition or to publicly explain their failure to
do so. The Fifth Circuit characterized this requirement as a “public-shaming
penalty for a corporation’s failure to abide by the Government’s diversity

48 See, e.g., DEL. CODE tit. 8, § 141(a) (providing that the business and affairs of a corporation shall be

managed by or under the direction of its board of directors); Aronson v. Lewis, 473 A.2d 805, 812 (Del.
1984).

16

requirements.”49 The court correctly recognized that such requirements fall
outside the purview of the Exchange Act. Under the same logic, Item 407(c)(2)(vi)
should be rescinded as well. The diversity-specific disclosure mandate under this
provision undermines the meritocratic system of corporate governance upon which
shareholders rely to maximize value.
X.

The Current “Diversity” Disclosure Mandate Does Not Produce
Decision-Useful Information

45. Item 407(c)(2)(vi) does not define “diversity,” and the Commission’s deliberate
decision not to provide a definition has produced a disclosure landscape
characterized by language that is neither comparable across issuers nor useful for
investor decision-making. Issuers have strong incentives to provide generalized,
non-specific disclosures to avoid regulatory, litigation, and reputational exposure.
The resulting disclosures are often inconsistent with the Commission’s
requirement that filings present information in a “clear, concise, and
understandable manner.”50 The absence of a standardized definition is especially
problematic in the IPO context, where investors are making initial capitalallocation decisions without the benefit of any prior public disclosure history
against which to evaluate the issuer’s representations.
46. A disclosure mandate without a standardized definition of “diversity” yields
indeterminate, non-comparable information in proxy statements that does not
meet the statutory standard of being “necessary or appropriate” for investor
protection. The Commission should not maintain rules that impose compliance
costs on registrants without delivering decision-useful information to investors.
XI.

Conclusion

47. For the foregoing reasons, AFL respectfully requests that the Commission:
a. Initiate notice-and-comment rulemaking to rescind the current language
of Item 407(c)(2)(vi) of Regulation S-K and amend the regulation by
replacing it with the text provided in bold in ¶ 2 attesting that race, sex,
gender, ethnicity, religion, nationality, disability, sexual orientation,
cultural background, socio-economic or demographic characteristics, or
49 All. for Fair Bd. Recruitment, 125 F.4th at 184 (quoting the majority characterization of Nasdaq

Rule 5605(f)).

50 See 17 C.F.R. § 230.421(b).

17

proxies for these characteristics were not considered, directly or indirectly,
in any aspect of identifying, evaluating, recruiting, or selecting director
nominees, and that no policy, target, quota, aspiration, or metric based on
those characteristics was applied in the nomination process;
b. Adopt the proposed regulatory language, provided in bold text set forth in
¶¶ 3–4 above, to amend Item 11(k) of Form S-1 (17 C.F.R. § 239.11)—and
the parallel corporate governance line items in Form S-11 (17 C.F.R. §
239.18), Form F-1 (17 C.F.R. § 239.31), and Form 10 (17 C.F.R. §
249.210)—to add a cross-reference to Item 407(c)(2)(vi) of Regulation S-K,
so that the revised certification requirement applies to initial public
offering and other initial registration statements;
c. Direct all SROs to remove any rules requiring or incentivizing
consideration of race, sex, gender, ethnicity, religion, nationality,
disability, sexual orientation, cultural background, socio-economic or
demographic characteristics, or proxies for these characteristics in board
nominations, director selections, or proxy disclosures, consistent with the
U.S. Constitution, federal nondiscrimination law, the purposes of the
Commission’s statutory authority, and current federal policy; and
d. Rescind SEC Staff Compliance and Disclosure Interpretations Item 401
Question 116.11 and Item 407 Question 133.13, which describe the
requirement to include self-identified diversity characteristics into
disclosures inconsistent with the proposed merit-based rules.
48. The SEC has the statutory authority to rescind and amend disclosure
requirements that are unnecessary and inappropriate for investor protection. In
light of the discussion above, the Commission should act expeditiously to rescind
the diversity disclosure mandate and implement the proposed amendments to the
regulation to restore merit-based corporate governance.
Respectfully Submitted,
/s/ Trey Donathan
Trey Donathan
Counsel
AMERICA FIRST LEGAL FOUNDATION
611 Pennsylvania Ave SE #231
Washington, D.C. 20003
trey.donathan@aflegal.org
(704) 412-8207

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Ae600a8bf31c2867e. Public record. Not legal advice.