Closing the DEI Disclosure Gap

23 Jun 2026 Closing the DEI Disclosure Gap

SEC Petition Calls for Disclosure of Risks Linked to Race-Based Financial Programs

Washington, D.C. - A new petition to the U.S. Securities and Exchange Commission (SEC) requests that the SEC issue guidance to publicly traded financial institutions regarding disclosure of material risks arising from race-based lending, investment and credit programs.

On May 12, 2026, the U.S. Department of Justice announced a $30 million settlement with PayPal regarding its 2020 Economic Opportunity Fund. This $530 million initiative explicitly channeled benefits toward "black and underrepresented minority businesses and communities" on the basis of race and national origin. The DOJ found these preferences violated the Equal Credit Opportunity Act (ECOA).

In the SEC petition, submitted by the National Center for Public Policy Research's Free Enterprise Project (FEP), FEP Senior Advisor Curtis Hill writes:

U.S. publicly traded financial institutions have become deeply entangled in race- and ethnicity-conscious programs that explicitly allocate lending, investments and economic opportunities based on demographic identity rather than individual merit, creditworthiness or neutral criteria.

While often presented as efforts to promote "equity," these initiatives carry substantial legal, regulatory, reputational, financial and operational risks - risks that are currently under-disclosed to investors.

In a legal environment grounded in colorblind equal protection and fair lending laws, such programs expose companies to enforcement actions, litigation, changes in regulatory scrutiny, portfolio impairments and erosion of shareholder value….

PayPal's experience is not isolated. Following the 2020 social unrest, numerous major financial institutions adopted similar race-conscious programs….

Investors and the public cannot afford incomplete information about practices that directly implicate core antidiscrimination laws and fiduciary duties…. We are asking the Commission to take action as soon as possible under its existing regulatory powers to remedy this situation.

"America's capital markets thrive when rooted in the rule of law, merit and equal opportunity for all individuals regardless of race or ethnicity," Hill concludes. "Clear guidance from the SEC will promote transparency, mitigate hidden risks, protect investors and reinforce the foundations of free enterprise."

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The Free Enterprise Project, the original and premier opponent of the woke takeover of American corporate life, aims to push corporations to respect their fiduciary obligations and to stay out of political and social engineering.

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