An SEC-registered stock exchange like Nasdaq is a self-regulatory organization (SRO). In 1975, Congress concluded that SROs left to their own devices might wield their market power for purposes that would not comport with the public interest. Congress amended the Securities Exchange Act of 1934 to provide that SROs may not change their rules without SEC approval. An SRO that wants to adopt 'any proposed rule or any proposed change in, addition to, or deletion from [its] rules' must file the proposed change with the SEC. When an SRO files a proposed rule change, the SEC is statutorily required to publish the proposal for notice and comment. SEC must approve the SRO's proposal if-but only if-'it finds [the proposal] is consistent with the requirements of' the Exchange Act. Under 15 U.S.C. § 78f(b) an exchange shall not be registered as a national securities exchange unless the Commission determines that . . . (5)The rules of the exchange are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with personsengaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers, or to regulate by virtue of any authority conferred by this chapter matters not related to the purposes of this chapter or the administration of the exchange. An exchange may not 'regulate by virtue of any authority conferred by this chapter matters not related to the purposes of [the Exchange Act] or the administration of the exchange.' Before the SEC approves a proposed exchange regulation, it must find that the regulation is related to the purposes of the Exchange Act. Nasdaq is the second-largest stock exchange in the world. Nasdaq did a study which revealed that 'while some companies already have made laudable progress in diversifying their boardrooms, the national market system and the public interest would best be served by an additional regulatory impetus for companies to embrace meaningful and multidimensional diversification of their boards.' Nasdaq submitted for SEC approval three rules it explained were designed 'to advance board diversity among its listed companies.' Rule 5606 'would require Nasdaq-listed companies . . . to provide statistical information in a proposed uniform format on the company's board of directors related to a director's self-identified gender, [self-identified] race, and self-identification as LGBTQ+.' Proposed Rule 5605(f ) would require Nasdaq-listed companies . . . (A) to have at least one director who self-identifies as a female, and (B) to 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 (C) to explain why the company does not have at least two directors on its board who self-identify in the categories listed above. Companies that do not meet the diversity objectives need only explain why they do not. Nasdaq submitted proposed Rule IM-5900-9 to enable it to offer companies who did not meet the 'aspirational diversity objectives' contained in the Diversity Rule, JA611 (quotation omitted), complimentary access 'to a board recruiting solution, which would provide access to a network of board-ready diverse candidates, allowing companies to identify and evaluate diverse board candidates, and a tool to support board benchmarking,' CEC approved all three rules. The SEC reasoned the Board Diversity Proposal was 'designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest.' Commissioners Roisman and Peirce dissented. Commissioner Roisman faulted SEC for failing to 'undertake its own reasoned analysis to evaluate the merits of' the Proposal. Commissioners Roisman and Peirce dissented. Commissioner Roisman faulted SEC for failing to 'undertake its own reasoned analysis to evaluate the merits of' the Proposal. Commissioner Peirce maintained that SEC's decision to approve the Proposal was substantively indefensible. The purposes of the Exchange Act 'boiled down to regulating securities transactions with an eye toward protecting interstate commerce and the financial system and ensuring the maintenance of fair and honest markets in securities transactions.' Peirce held that the Board Diversity Proposal did not advance any of these purposes of the Act and that the goal to remedy a societal challenge bore no relation to 'the authority granted them in the Exchange Act.' The SEC concluded that the Recruiting Rule did not unfairly discriminate among issuers-i.e., listed companies-because it made sense for Nasdaq to offer the service to companies that failed to meet Nasdaq's diversity objectives. P filed a petition for review.

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