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Client Alert

LANDMARK CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT: A Practical Guide

March 26, 2020

by Beth Forsythe, Alex Hontos, Troy M. Keller, Jay R. Lindgren, Joseph Lynyak, John Marti, and Jamie Whatley

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On March 25, 2020, the U.S. Senate passed a $2 trillion federal stimulus package (the largest in U.S. history) by an historic 96-0 vote. The Bill now goes to the U.S. House of Representatives (vote expected Friday, March 27) and then the President. Dorsey has been closely studying the language which, as passed by the Senate, provides many important measures discussed here. We’ll continue to update this information as the Bill moves to final passage. We encourage you to directly contact those listed in this article for any questions or updates.

After the U.S. House of Representatives enacted the Families First Coronavirus Relief Act (“FFCRA”) on March 18, 2020, the U.S. Senate turned to federal economic relief, focusing on the novel coronavirus and the related illness’s (“COVID-19’s”) continued impacts on the economy and taxpayers. The Senate Bill represents a compromise with the White House (referred to here as the “Stimulus Act”).

Bill sections of particular interest to our clients are summarized below, with contact information for Dorsey attorneys in each area. Detailed summaries on these various subjects will be published over the coming days. Please reach out directly to these team members or, for more general assistance, contact a Governmental Relief & Incentives Team coordinator—Beth Forsythe, Alex Hontos, Troy Keller, Jay Lindgren, Joe Lynyak, John Marti, or Jamie Whatley—any of whom can help direct you to the right resources.

I. Emergency Relief and Taxpayer Protections—$500 Billion to Mid-Sized and Larger Businesses (500 – 10,000 employees) – Joe Lynyak, Jon Abram, Troy Keller

Section 4003 of the Stimulus Act is a compromise that provides the Treasury Secretary with authority to issue regulations for allocating $500 billion in assistance to U.S. businesses and non-profits, and funnels issuance of those funds through credit facilities established by the Federal Reserve Board (“FRB”). (This process appears to limit the FRB to using the funds only when the credit or guaranty complies with the requirements of Section 13(3) of the Federal Reserve Act.) Also included is additional oversight to monitor the use of funds.

Of the $500 billion, loans and loan guaranties may be allocated as follows: $25 billion to commercial airlines and related air travel companies; $4 billion to air cargo companies; and $17 billion to businesses critical to maintaining national security. The remainder may be directed to the FRB for loans, loan guaranties and other investments in programs and facilities established by the FRB to provide liquidity to the financial system by (i) purchasing obligations directly from issuers; (ii) purchasing obligations in secondary markets; and (iii) making loans, including secured loans.

The Stimulus Act currently limits a corporate entity’s ability to declare dividends or repurchase stock, and also permits the government to take warrants or other securities that will eventually be repaid.

The actual processing of financial assistance remains to be seen—while the FRB is experienced based upon the TARP and HARP programs over a decade ago, it is possible that the FRB will act in an oversight capacity while other entities administer application and underwriting functions. In that regard, the Treasury Secretary is authorized to hire or employ financial intermediaries to operate the newly authorized credit facilities. The Secretary of Treasury is required to publish procedures for applying for loans within ten days of enactment of the Act.

Importantly, for mid-sized businesses, defined as having 500 to 10,000 employees, the Stimulus Act establishes a 2% maximum annual interest rate on financing, and provides that no principal and interest will be due for the first six months of the loan. These loans will be made available through a special program that requires recipients to, among other things, make a good faith certification that they will maintain 90% of their current workforce and, if applicable, restore 90% of their workforce as it existed on February 1, 2020. Recipients that are listed on national exchanges will also be restricted from paying dividends to common shareholders and from abrogating collective bargaining agreements. To qualify, recipients must certify that they require the loan due to the uncertainty of economic conditions.

II. Public Finance – David Grossklaus, Jennifer Hanson

The above-described Treasury funds will benefit state and local governments through direct payments to state and local governments in an aggregate amount of $139 billion not later than 30 days after the date of enactment of the Stimulus Act for payment of necessary expenditures incurred due to the public health emergency and for which budget was not allocated. The allocation of funds among the 50 states is based on the relative population proportion amount determined for the state, provided that each state will receive at least $1.250 billion for fiscal year 2020. The allocation to a state will be reduced by amounts requested by and approved for local governments within that state for such expenditures.

III. Small Business Administration (“SBA”) Financing – Ken Logsdon, Jamie Whatley

A program created by the Stimulus Act will assist small businesses, non-profits and other concerns that have reduced staff, missed payroll or are simply struggling to make payroll due to the impact of COVID-19.

The Stimulus Act has SBA offering additional emergency financing for working capital and other purposes to qualified businesses, non-profits and other concerns suffering substantial economic injury as a result of COVID-19, beyond that offered through last week’s SBA Disaster Relief Program. Under that Disaster Relief Program, a small business may qualify for a maximum $2 million federal disaster loan as provided by the SBA. The Stimulus Act is expected to expand the SBA Disaster Relief Program, and implement a new program where both small and many large businesses, non-profits and other concerns may qualify for forgivable loans of up to $10 million each (also known as the “paycheck protection program”). This program will be available to qualifying businesses, non-profits and other concerns for purposes of payroll and other expenses even if such qualifying company has already decreased salaries or reduced workforce in response to COVID-19. Business concerns that qualify for both the SBA Disaster Relief Program and Stimulus Act relief will have to choose just one program. These two distinct programs are anticipated to assist tens of thousands of small and large U.S.-based businesses, non-profits and other concerns adversely impacted by COVID-19.

IV. Healthcare – Alissa Smith, Claire Topp

Title III of the Stimulus Act, titled “Supporting America’s Health Care System in the Fight Against the Coronavirus,” provides much-needed financial assistance to the health care industry, and clarifies available regulatory and statutory waivers and other benefits for hospitals and those on the front lines fighting the COVID-19 pandemic. Title III does the following:

  • Addresses medical supply shortages, emergency drug shortages, and medical device shortages;
  • Clarifies coverage of diagnostic testing and preventative services related to COVID-19;
  • Awards $1.32 billion in supplemental funding for grants to certain health centers for the prevention, diagnosis, and treatment of COVID-19; more than $23 million in appropriations to health professional workforce programs to increase the number of health care providers in the U.S.; and more than $250 million for the establishment of new clinics across the country to address the nursing shortage;
  • Limits liability for volunteer health care professionals who help the COVID-19 emergency response;
  • Clarifies coverage for telehealth services and over-the-counter medical products, as well as providing additional options for waivers for Medicare and Medicaid payment requirements for telehealth, and new provisions to cover telehealth for Federally Qualified Health Centers and Rural Health Centers, in addition to telehealth for home dialysis patients, home health and hospice patients;
  • Increases payments for inpatient care and coverage for COVID-19 post-acute care, a statement that Medicare Part B will cover any COVID-19 vaccine just as it covers the influenza vaccine, and an allowance for Medicare beneficiaries to obtain a three-month supply of their prescriptions during this emergency time;
  • Provides access to COVID-19 related care for uninsured individuals, and increases funding for both Medicare and Medicaid programs, along with additional funding for community health centers, the National Health Service Corps, and teaching health centers that operate graduate medical education programs; and
  • Addresses the regulation of certain over-the-counter drugs that are marketed without an approved drug application.

V. Employment – Ryan Mick, Drew James

The Stimulus Act contains a novel expansion of unemployment benefits and noteworthy revisions to the FFCRA’s paid-leave requirements that take effect on April 1, 2020.

Paid Leave for Rehired Employees

Any employee who worked for an employer for at least 30 of the past 60 days, is laid off on or after March 1, 2020, and is subsequently rehired, will be considered an “eligible employee” who may claim entitlement to paid benefits under the Emergency Family and Medical Leave Expansion Act (“EFMLEA”) of the FFCRA, passed March 18, 2020. If you are considering layoffs or rehiring an employee who was terminated after March 1, we strongly recommend you seek counsel to discuss the practical implications of this provision.

The Stimulus Act amends FFCRA limits on employers’ payments for EFMLEA and emergency paid sick leave as follows:

  • For EFMLEA leave, an employer is not required to pay more than $200 per day, or $10,000 in the aggregate, for any employee’s paid leave;
  • For emergency paid sick leave, an employer is not required to pay more than:
    • $511 per day, or $5,110 in the aggregate, if the employee takes leave related to a federal, state, or local quarantine or isolation order; has been advised by a health care provider to quarantine due to COVID-19-related concerns; or is experiencing COVID-19 symptoms and seeking a medical diagnosis; or
    • $200 per day, or $2,000 in the aggregate, if the employee takes leave to care for an individual subject to a quarantine or isolation order or is advised to quarantine as described above; to care for a son or daughter whose school or child care provider has closed or is unavailable due to COVID-19; or is experiencing a substantially similar condition specified by the Secretary of Health and Human Services.

Unemployment Assistance

Title II of the Stimulus Act—the “Relief for Workers Affected by Coronavirus Act”—extends the scope of unemployment benefits to workers impacted by COVID-19.

A worker who is not eligible for regular compensation or extended benefits under state or federal law, or pandemic emergency unemployment compensation (for example, someone who has exhausted his or her right to regular unemployment or extended benefits), and who self-certifies that he or she is able and available for work except that he or she is unemployed (and cannot telework, and is not receiving paid sick leave or other paid leave benefits) because of a list of COVID-19-related reasons for unemployment, will be eligible for additional unemployment benefits. Specifically, the Secretary of Labor is instructed to provide unemployment benefit assistance to those employees for a period of nearly a year, from January 27 to December 31, 2020, as long as his or her inability to work caused by COVID-19 continues (but not to exceed 39 weeks, including any weeks the employee received regular compensation or extended benefits).

The amount of unemployment benefits is to be no less than the weekly amount of compensation the individual would have been paid as regular compensation in employment.

States are only eligible to enter into an agreement with the federal government for repayment of unemployment benefits if their state law eliminates the waiting week for employees to receive unemployment benefits.

VI. Tax – Mary Streitz, Katina Peterson, Kendall Fisher

The Stimulus Act contains a number of significant, mostly temporary, changes to the federal tax laws aimed at providing immediate and short-term economic relief to individual and business taxpayers, including: 

  • Exclusions from taxable income for newly introduced payroll loan and loan forgiveness programs;
  • Delayed deposit dates for certain employment taxes;
  • Immediate refunds issued to eligible taxpayers of up to $1,200 per individual plus $500 per qualifying child;
  • Refundable employment tax credits of up to $5,000 per employee equal to 50% of the wages paid by certain employers adversely affected by the COVID-19 emergency to employees who were retained by the employer but not able to provide services due to the emergency;
  • Allowance of charitable deductions up to $300 to individuals who do not itemize deductions;
  • Temporary suspension of certain charitable deduction limitation thresholds;
  • Increased availability of certain net operating losses of corporations and other taxpayers to offset taxable income and permitting certain net operating losses to be carried back for up to five (5) years;
  • Accelerated availability, or full refund, of AMT credit carryforwards; and
  • Increased availability of business interest deductions.

VII. Government Contracting and Grants – Alex Hontos

Under the Stimulus Act, Title III, Section 3610, agencies “may” modify federal contracts to ensure that contractors keep their workforce in a “Ready State.”  Agencies can be reimbursed for employee or subcontractor expenses for an average of 40 hours per week if the employees or subcontractors “cannot perform work on a site that has been approved by the Federal government” due to “facility closures or other restrictions, and who cannot be performed remotely.” The Stimulus Act contains numerous grants and appropriations for healthcare, medical supplies, and state and local entities, and for the construction of medical and research facilities. It also removes some pre-clearance requirements to expedite Presidential action under the Defense Production Act and increases the $750 million ceiling on the DPA Fund. The government has already begun solicitations for large procurements to respond to COVID-19.

VIII. Patent and Trademark – Nat Longley, Liz Buckingham, Kimton Eng, Andrew Quecan

For clients with intellectual property, the Stimulus Act provides temporary but potentially critical authority for the Director of the United States Patent and Trademark Office (USPTO) to toll, modify or waive deadlines under federal trademark and patent law during the COVID-19 emergency. Changes can be made where the Director determines the COVID-19 emergency materially affects functioning of the Offices, prejudices the rights of trademark and patent owners and others appearing before the USPTO, _or_ if it prevents anyone from filing a document or paying a fee. The provision is important because it extends the existing authority of the Director for extraordinary situations and postal service interruptions under 35 USC 21 and 37 CFR 1.83, expressly allowing the Director to waive or extend statutory deadlines in line with other major trademark and patents offices including Europe, Canada, China, India (and many if not most others). There is a public notice provision, and the Director must inform Congress within 20 days for any change lasting more than 120 days.

IX. Copyright – Jeff Cadwell, Kimton Eng, Andrew Quecan, Liz Buckingham, Nat Longley

The Stimulus Act also provides temporary authority for the Register of Copyrights (e.g., the Director of the U.S. Copyright Office) to toll, waive, adjust, or modify any timing provision (including any deadline or effective period) under the Copyright Act or 37 CFR Chapter I or II during the COVID-19 emergency period. Changes can be made where the Director reasonably determines that such changes are “appropriate to mitigate the impact of the disruption caused by the national emergency.” Like other provisions for the USPTO, there is a public notice provision, and the Register must inform Congress within 20 days for any change lasting more than 120 days. However, under these emergency provisions, the Register does not have authority to extend copyright terms or most deadlines to commence federal litigation.

X. Retirement Plan Provisions - Tim Arends

Section 2202 of the Stimulus Act permits 401(k) and 403(b) plan sponsors to amend their plans to allow participants to take an early distribution without imposition of the 10% early withdrawal penalty for participants under age 59 ½ for any reason up to $100,000 provided they have been affected by COVID-19. This provision also applies to Individual Retirement Accounts (IRAs). To qualify, a participant must certify they have been impacted due to being infected with the virus; having a spouse or dependent infected with the virus; experiencing adverse financial consequences as a result of being quarantined, furloughed or laid off or having work hours reduced due to the virus; being unable to work due to lack of child care due to the virus; closing or reducing hours of a business owned or operated by the individual due to the virus; or such other factors as determined by the Secretary of the Treasury. Participants can spread the income tax for the related distribution over three years and can also return the amount withdrawn to the plan over a three-year period if they wish. In addition, plan sponsors may amend their 401(k) plans to increase the current $50,000 limitation on participant loans to $100,000 for those impacted by COVID-19 and permit 100% of their accounts to be borrowed. Individuals impacted by the virus as outlined above who take out a loan beginning on the date of enactment through December 31, 2020 can delay starting repayment for up to one year. Section 2203 provides a temporary waiver during 2020 of required minimum distributions from defined contribution plans and IRAs for calendar year 2020. Section 3608 provides limited funding relief for defined benefit pension plan sponsors by delaying quarterly contributions for 2020 to January 1, 2021.

XI. Food and Agriculture – Michael Weaver, Dave Swanson, Bridget Hayden, Mike Droke, Robert Hensley

The Stimulus Act’s emergency appropriations for U.S. Department of Agriculture (“USDA”) and its agencies and programs will provide benefits to food and agriculture companies and producers, primarily through funding of existing programs. The Stimulus Act includes $48.9 billion for USDA’s response to COVID-19, including:

  • $14 billion to partially replenish the funds of USDA’s Commodity Credit Corporation (“CCC”), which have been depleted down to approximately $9 billion due to the Market Facilitation Program. These funds should help the USDA provide increased direct aid to producers;
  • $9.5 billion to assist livestock operations (including dairy), specialty crop production, and farms with direct sales to farmers’ markets, schools, and restaurants; 
  • $24.3 billion for nutrition programs, consisting of $15.5 billion for USDA’s Supplemental Nutritional Assistance Program (“SNAP”) and $8.8 billion for child nutrition programs;

The Stimulus Act provisions discussed above that provide loans, loan guaranties, and direct financial assistance will also be available for eligible businesses in food and agriculture industry.

XII. Tribal Issues – James Nichols, Skip Durocher, Mary Streitz

Coronavirus Relief Fund - $8 Billion Reserved for Tribal Governments

The Secretary of the Treasury is required to reserve at least $8 billion of the $150 billion Coronavirus Relief Fund, which is a part of the Stimulus Act that covers state, local and tribal governments, for payments to tribal governments. The funds may be used by tribal governments for necessary expenditures incurred between March 1 and December 30, 2020, due to the COVID-19 public health emergency and not accounted for in the most recently approved tribal government budget.

Emergency Appropriations - $1.4 Billion to IHS and BIA with $850 Million Reserved to Address Direct Needs of Tribes

The Emergency Appropriations for Coronavirus Health Response and Agency Operations, included in the Stimulus Act, include an additional $1 billion for the Indian Health Service (“IHS”) and $450 million for the Bureau of Indian Affairs (“BIA”).

At least $450 million of the IHS appropriation shall be distributed to IHS direct-service health programs, to tribes and tribal organizations under the Indian Self-Determination and Education Assistance Act (ISDEAA), and through contracts or grants with urban Indian organizations under Title V of the Indian Health Care Improvement Act. The funds must be used to prevent, prepare for, and respond to COVID-19, including for public health support, electronic health record modernization, telehealth and other information technology upgrades, health services provided by Purchased/Referred Care programs, Catastrophic Health Emergency Fund reimbursements, and other activities to protect the safety of patients and health program staff.

At least $400 million of the BIA appropriation must be made available to meet the direct needs of tribes, including one-time transfers under ISDEAA funding agreements. The funds must be used to prevent, prepare for, and respond to COVID-19, including:  public safety and justice programs, deep cleaning of facilities, purchase of personal protective equipment, purchase of information technology to improve teleworking capability, welfare assistance and social services programs (including assistance to individuals), and assistance to tribal governments. Funds distributed from the BIA appropriation shall not be included in the statutory maximum for welfare assistance funds.

Other Provisions Relevant to Tribes

The stimulus package also provides for an additional $125 million in funding for tribes from the Centers for Disease Control, $300 million in housing grants, $100 million for food distribution programs, $15 million for substance abuse and mental health services, and increased eligibility of tribal businesses for small business loans.

Tribal schools are eligible for waivers of statutory and regulatory provisions in the Elementary and Secondary Education Act of 1965 and the General Education Provisions Act.

XIII. Antitrust – Michael Lindsay, James Nichols

The Department of Justice requested changes to merger review and investigation deadlines, but they were are not included in the Stimulus Act.

XIV. State and Local Government Issues – Jay Lindgren

States and local governments across the country are updating existing programs to relieve COVID-19 impacts on residents and resident businesses and organizations. Dorsey is tracking these changes and stands ready to assist with any local questions.

Government Relations and Lobbying Considerations – Troy Keller, Cam Winton, Mike Ahern, Molly Sigel

Given the scale of the Stimulus Act and the fact its impacts will be felt by virtually every business and individual in the country, we are encouraging clients (perhaps more so than ever before) to be proactive. It is important to:

  • Stay informed on latest developments (e.g., rollouts of specific programs and the potentiality for a fourth stimulus/regulatory relief bill);
  • Be early in the queue, whether in applying for the loan and guaranty programs, seeking tax credits or pushing for clarity with a regulator; and
  • Maintain communications with important relationships, such as your trade associations, sector coalitions and members of Congress who can support you in your applications and in navigating new rules and regulations. 
    We are here to help with regulatory advice, policy monitoring, political engagement, lobbying of officials, and broad government relations support.

The Stimulus Act is singular in its size and scope, and is filled with nuance and unanswered questions. Execution will be complex. The Dorsey Governmental Relief & Incentives Team, including the members linked in the specific sections above, is here to help you understand and navigate this law and lobby for what you need as you do the multi-faceted work of addressing the economic impact of COVID-19. You can visit our team page here.

 

Firm Highlights

Insights

The Methane Regulatory Pendulum Swings Again: EPA Proposes Sweeping Changes to Federal Standards for the Oil and Natural Gas Sector

Few environmental regulations better illustrate Washington’s regulatory “ping-pong” than EPA’s methane standards for the oil and natural gas sector. Over the last decade, successive administrations have repeatedly expanded, narrowed, rescinded, reinstated, and revised federal methane requirements, leaving industry to navigate a shifting compliance landscape with each change in administration. EPA’s October 27, 2026 proposal to reconsider significant portions of the 2024 oil and natural gas New Source Performance Standards (“NSPS”) and Emission Guidelines (“EG”) under Subparts OOOOb and OOOOc represents the latest swing of the regulatory pendulum. If finalized, the proposal would substantially reduce compliance obligations in several areas, particularly with respect to lower-producing wells, associated gas flaring, equipment and control-device standards, and the Super Emitter Program. EPA estimates that the proposal would result in approximately $45 billion in savings, while preserving what the agency considers appropriate methane emission controls. EPA’s proposal was published in the Federal Register on October 29, 2026. Comments must be received on or before December 16, 2026.  Significantly, EPA is not using this rulemaking to reconsider its general authority to regulate methane emissions from the oil and natural gas sector. Rather, the agency is addressing specific requirements adopted in the 2024 methane rule, while broader questions concerning greenhouse gas regulation are being addressed in separate proceedings. The present proposal therefore focuses on the appropriate design and scope of particular methane regulations, rather than resolving the threshold question of whether methane may be regulated under the Clean Air Act at all. I.    EPA Proposes to Eliminate the Super Emitter Program Among the proposal’s most consequential changes is the complete elimination of the Super Emitter Program. Adopted in 2024, the program created a regulatory framework under which EPA-certified third parties could identify large methane releases using approved remote-sensing technologies. Upon receiving a qualifying notification from EPA, owners and operators were required to investigate the reported emissions event, report findings to EPA, and take corrective action where necessary. EPA now proposes to repeal the Super Emitter Program in its entirety. The agency questions the program’s legal and policy foundations, including the role of third parties in identifying emissions events and triggering regulatory obligations. EPA also questions whether the program is necessary or effective given other requirements applicable to regulated sources and whether its expected emissions reductions justify its costs and implementation challenges. Because the program was incorporated into both the NSPS applicable to new, modified, and reconstructed sources and the EG applicable to existing sources, its removal would affect federal requirements as well as the presumptive requirements that States otherwise would be expected to address in Clean Air Act § 111(d) plans. Importantly, EPA’s proposed repeal does not prevent States from developing and implementing their own Super Emitter Program based on the existing requirements, which several states are already doing.  II.    EPA Reconsiders Associated Gas Requirements Another centerpiece of EPA’s proposal is its reconsideration of the 2024 rule’s restrictions on flaring associated gas from oil wells. The 2024 rule determined that the best system of emission reduction (“BSER”) generally required operators to capture and beneficially use associated gas by routing it to a sales line, using it onsite, or reinjecting it, rather than routinely flaring it. Although EPA provided certain transition periods and compliance flexibilities, particularly for wells facing infrastructure constraints, the rule ultimately established a framework strongly favoring capture and utilization over flaring. Since promulgation, EPA has received significant feedback regarding gathering-system limitations, gas quality issues, and other practical barriers operators face in securing outlets for associated gas. In response, EPA proposes to replace the existing capture-focused approach with a substantially more flexible standard. EPA argues that the 2024 rule relied too heavily on the availability of third-party gathering and processing infrastructure that is often beyond an operator’s control, raising questions regarding achievability and cost-effectiveness. Under the proposal, BSER would be based on routing associated gas to a flare or other control device capable of achieving at least a 95 percent reduction in methane and volatile organic compound (“VOC”) emissions. Operators could continue to capture gas for sale, use it onsite, or reinject it where feasible, but those practices would no longer be required. EPA also proposes that if a portion of associated gas is routed to sales or used for another purpose, the remaining portion must comply with the 95 percent standard. For example, if a company can route 40 percent of its associated gas to a sales line, the company would need to route the other 60 percent to a control device with a 95 percent reduction, or to a flare. EPA is also soliciting comment on less sweeping alternatives that would preserve the basic structure of the 2024 associated-gas program, while providing additional compliance flexibility. In particular, EPA requests comment on whether it should retain the current capture-and-sales framework but expand the circumstances under which temporary flaring is permitted or extend the duration of temporary flaring allowances where operators face infrastructure constraints. EPA appears to recognize that gathering-system availability, processing constraints, and other third-party factors can affect an operator's ability to route gas to sales, even where the operator ultimately intends to comply with the capture requirements. These requests for comment suggest that EPA is considering whether targeted revisions to the existing framework could address implementation concerns without fully abandoning the 2024 rule's underlying preference for gas capture and beneficial use. III.    EPA’s Reconsideration of the “No Identifiable Emissions” Standard EPA's proposal would substantially revise the 2024 rule’s “no identifiable emissions” (“NIE”) requirements applicable to certain covers and closed vent systems (“CVS”) associated with storage tanks. Under the existing rule, covered equipment generally must operate without identifiable emissions, creating a compliance framework that focuses heavily on the absence of observable emissions rather than solely on equipment design or overall control effectiveness. Since promulgation, industry has argued that the standard effectively functions as a zero-emissions requirement that may be difficult to satisfy under all operating conditions, even where equipment and vapor control systems are properly designed, maintained, and operated. Moreover, EPA stated in the preamble to the 2024 rule that any identified emissions would constitute a deviation of the emissions limitation, resulting in a framework under which the observation of emissions could itself establish noncompliance. EPA now proposes to separate the requirements into distinct design and operational components and to fundamentally alter how compliance with the operational NIE requirement is evaluated. EPA proposes to distinguish between deviations of the design requirements and deviations of the operational NIE requirements. Under the proposed approach, failure to repair an identified emission or defect within 24 hours would constitute a deviation of the design requirement, although not necessarily an underlying violation. Separately, operators could demonstrate compliance with the operational NIE requirement by making repairs as soon as practicable, with an initial repair attempt within five days and final repair within 30 days, or by qualifying for the existing delay-of-repair provisions. A deviation of the operational requirement would occur if the applicable repair deadlines are not met and the delay-of-repair provisions do not apply. The proposal also establishes a new framework for addressing recurring or “chronic” emissions events. After the third emissions event or defect from the same cover or CVS within a year, the owner or operator would be required to conduct an investigative analysis within 10 days to determine whether the underlying cause relates to equipment design, operation, maintenance, or prior repair efforts. The results of that investigation would have important compliance implications. If recurring emissions are attributable to a design flaw, EPA would treat the issue as a deviation of the design requirements. If the emissions result from inadequate prior repairs, the deviation would be attributed to the repair requirements. If operations, maintenance, or other site practices are responsible, the deviation would be classified under the operational requirements. EPA would also require implementation of corrective measures identified through the analysis, including design modifications within 90 days and operational or maintenance-related corrective actions within 30 days. Taken together, these revisions would shift the NIE standard away from a framework in which the mere presence of emissions may establish noncompliance and toward one that focuses on whether operators identify emissions, complete timely repairs, investigate recurring problems, and address the root causes of repeated emissions events. IV.    Solicitation of Comment on “Legally and Practicably Enforceable” Standard EPA is also soliciting comment on the definition of “legally and practicably enforceable” (“LPE”), which industry has identified as one of the more problematic existing requirements. Under the 2024 rule, EPA adopted an interpretation of LPE that many commenters argued effectively disqualifies numerous state regulatory programs, permits, and other federally enforceable mechanisms from serving as the basis for remaining below applicable Subpart OOOOb storage tank thresholds. In particular, stakeholders have asserted that the current LPE framework makes it difficult for state air permitting programs and other state regulatory requirements to satisfy EPA's criteria, thereby causing more storage tanks and other emission units to remain subject to Subpart OOOOb requirements than would otherwise be the case. EPA now requests comment on whether its current interpretation of LPE is overly restrictive and whether alternative approaches would better account for the manner in which state permitting and regulatory programs are administered and enforced. The request is significant because a broader interpretation of LPE could allow a wider range of federally enforceable state permits and regulatory requirements to satisfy exemption criteria under OOOOb, potentially reducing the number of storage tanks and other sources subject to direct NSPS regulation. As a result, the LPE issue has implications that extend beyond compliance mechanics and could materially affect the scope of sources regulated under the federal methane program. V.    Revised Requirements for Marginal Wells EPA is also proposing significant revisions to the treatment of lower-producing wells under Subparts OOOOb and OOOOc. The agency notes that marginal wells constitute a substantial portion of the nation’s producing well inventory but account for a relatively small share of overall production. At the same time, EPA discusses studies estimating that marginal wells contribute a disproportionate share of methane emissions from oil and natural gas production. The agency is evaluating whether the 2024 rule appropriately accounts for the operational characteristics, emissions profiles, and compliance costs associated with these wells. To address those concerns, EPA is proposing two alternative approaches to well-site subcategorization. Under the first option, EPA would distinguish between marginal and non-marginal well sites. EPA proposes to define a marginal well as a well that produced no more than 15 barrels of oil equivalent (“BOE”) per day over the prior 12-month period and a marginal well site as a site consisting exclusively of marginal wells with total site-wide production of no more than 15 BOE per day over the same period. EPA is also soliciting comment on whether marginal wells should be further subdivided based on production levels, including a potential distinction between sites producing 6 BOE per day or less and sites producing more than 6 BOE but no more than 15 BOE per day, which could result in additional regulatory flexibility for the lowest-producing wells. Under the second option, EPA would distinguish between conventional and unconventional well sites and tailor requirements based on that classification, including reduced requirements for conventional wells. The agency is seeking comment on which framework better reflects the operational and emissions characteristics of different well sites, as well as whether additional subcategories should be established within the marginal-well population and the extent to which compliance requirements should differ among categories. VI.    LDAR, Pneumatic Controllers, Control Device Monitoring, and Facility Modifications EPA's proposal also includes several targeted revisions to the 2024 rule's leak detection and repair (“LDAR”) requirements. Most notably, EPA proposes additional flexibility in the use of advanced monitoring technologies and seeks to move away from compliance frameworks that rely heavily on a single detection method. The agency is proposing changes intended to facilitate the use of multiple monitoring technologies, including optical gas imaging and other alternative detection approaches, and is seeking comment on whether technology-neutral compliance options can achieve equivalent emissions reductions at lower cost. EPA also proposes revisions for components and equipment that are particularly difficult to monitor using conventional LDAR methods, reflecting concerns that certain 2024 requirements may not be practical or cost-effective in the field. More broadly, EPA questions whether some of the monitoring frequencies adopted in 2024 appropriately balance compliance burdens and emissions-reduction benefits and seeks comment on additional opportunities to tailor LDAR obligations based on emissions risk and source characteristics. EPA also proposes technical revisions to requirements governing control devices and related equipment. These include changes addressing continuous pilot-flame requirements, flame-monitoring data deviations, control-device alerts, visible-emissions test conditions, temporary or backup control devices, temporary process controllers, and control-device categories. The agency’s stated objective is to provide additional compliance flexibility while maintaining appropriate emissions controls. The practical effect will depend on the final requirements and the equipment and circumstances to which each amendment applies. The proposal also addresses pneumatic controllers and equipment leaks at gas processing plants. For certain high-pressure process controllers at transmission compressor stations, EPA proposes a separate regulatory approach based on its reassessment of technical feasibility and cost. The proposal should not be read as establishing a general exemption for pneumatic controllers across the industry. EPA also proposes changes to other equipment-specific requirements, including requirements applicable to pumps, storage vessels, and equipment leaks at gas plants, in response to concerns raised following promulgation of the 2024 rule. Finally, EPA proposes changes to certain requirements governing liquids unloading and other well-site operations, as well as technical corrections and clarifications to the existing regulatory text. These provisions form part of EPA’s broader effort to address implementation concerns and reassess the costs and expected emissions reductions associated with selected requirements in the 2024 rule. Operators should evaluate the specific proposed amendments applicable to their facilities rather than assume that the proposal would provide across-the-board relief from existing monitoring, equipment, or control-device obligations. VII.    Implications for States and Future Congressional or Administrative Action EPA’s proposal would substantially revise several consequential elements of the 2024 methane rule, but it would not eliminate regulation of existing oil and natural gas sources under Clean Air Act § 111(d). As a result, states remain subject to the existing obligation to develop and submit plans for existing sources. If the proposed revisions are finalized, states currently developing those plans may need to reevaluate key program elements, including requirements relating to associated gas, well-site subcategories, the Super Emitter Program, and other compliance obligations. The proposal does not itself extend the January 22, 2027 deadline for state-plan submissions established under the existing framework. The Congressional Review Act (“CRA”) remains a potential source of uncertainty. Depending on when EPA submits a final rule to Congress and the applicable congressional-session timing, a future Congress and President could seek to disapprove the rule under the CRA. A successful disapproval would invalidate the rule and generally restrict the agency from issuing a rule in substantially the same form absent subsequent statutory authorization. The CRA’s lookback provisions can affect the period during which a rule remains subject to congressional review, so the risk cannot be assessed solely by reference to the calendar year in which the rule is finalized. The timing of finalization and submission to Congress, together with the applicable congressional calendar, will determine the extent of that exposure. Finally, unlike the CRA, which can nullify a recently promulgated rule through legislative action, a future administration seeking to unwind this rule would generally need to proceed through a new notice-and-comment rulemaking. EPA would need to revisit the underlying BSER determinations, cost analyses, technical feasibility findings, and enforceability conclusions that support the final rule. Because this proposal is grounded heavily in findings regarding achievability, legal and practical enforceability, and cost-effectiveness, a future administration would need to develop a sufficient record supporting different conclusions before reinstating more stringent requirements. Consequently, the final rule may prove more durable than prior pendulum swings, even if it remains politically controversial.

News

Dorsey & Whitney Advises Beijing Xunzhong on Two Consecutive H Share Placings Raising HK$418.5 Million

International law firm Dorsey & Whitney LLP acted as Hong Kong legal advisors to Beijing Xunzhong Communication Technology Co., Ltd. (“Xunzhong”) as to Hong Kong law in connection with two consecutive placings of new H shares under general mandate (the “First Placing” and the “Second Placing”, respectively, and together, the “Placings”). Xunzhong’s H shares are listed on the Main Board of the Hong Kong Stock Exchange (Stock Code: 2597). Winbull Securities International (Hong Kong) Limited acted as sole overall coordinator and placing agent on both Placings. The First Placing of 11,190,000 new H shares at HK$28.20 each was completed on September 17, 2026, followed by the Second Placing of 3,550,000 new H shares at HK$29.00 each on October 30, 2026. The Placings raised approximately HK$315.56 million and HK$102.95 million in gross proceeds, respectively, or approximately HK$418.51 million in aggregate (approximately HK$415.96 million in aggregate net proceeds). Both Placings were conducted under the same general mandate granted by shareholders at Xunzhong’s 2025 annual general meeting, and each was completed within one week of the signing of its placing agreement. Completing placings in consecutive months is relatively uncommon in the Hong Kong market, and doing so called on the technical depth of Dorsey’s Hong Kong Capital Markets team. Working closely with Xunzhong to understand its business needs and prepare the transaction documents, the team addressed in quick succession the remaining capacity under the general mandate, disclosure of the use of proceeds and the maintenance of Xunzhong’s public float, enabling both Placings to be completed seamlessly. “We are pleased to have advised Xunzhong on both Placings,” said Rachel Han, Partner and Co-Head of Dorsey’s Asia Capital Markets practice. “We appreciate the trust placed in our team and the close collaboration among all parties involved. We look forward to supporting Xunzhong as it continues to execute its growth strategy and pursue future capital markets opportunities.” Xunzhong is principally engaged in cloud-based communications services and enterprise digitalization services in the PRC. As disclosed in its announcements, the net proceeds of the First Placing are allocated to developing Xunzhong’s new computing power operation services business, while those of the Second Placing will be used to integrate model-as-a-service (MaaS) and AI agent capabilities into its existing cloud communications platform-as-a-service (PaaS) platform and software-as-a-service (SaaS) products. Approximately 55% of the net proceeds of the Second Placing will be used for computing power equipment upgrades for the MaaS system, approximately 35% for MaaS, PaaS and SaaS platform upgrades, and approximately 10% for working capital and general corporate purposes. With a single MaaS platform and shared computing power supporting its PaaS and SaaS offerings, Xunzhong intends for its MaaS, PaaS and SaaS capabilities to complement and reinforce one another, and to address customer needs from multiple angles, from embedding AI in customer communications and business workflows to maintaining stable performance at scale and keeping customer data within controlled environments. Partner and Co-Head of Dorsey’s Asia Capital Markets practice Rachel Han and Of Counsel in the Capital Markets and Corporate Compliance group Carlton Ng, along with Associate Kristy Ting, led the Dorsey Hong Kong Capital Markets & Corporate Compliance group in advising Xunzhong on both Placings.

Event/Resource

Corporate Counsel Symposium 2026 Materials Hub

Materials Symposium Agenda Sessions 8:30 am - 9:30 am CT Session A: The Corporate Compass: Finding True North When Ethical Duties Conflict Philip Kaplan, Senior Legal Counsel, Howden Re Lucia Suljic, Vice President, Corporate Legal, Canon USA Nicole Stanton, Partner & Deputy General Counsel, Dorsey & Whitney LLP This panel addresses ethical obligations of in-house counsel, including balancing obligations and duties that may conflict with each other. How should a responsible in-house lawyer deal with those challenging situations? Rather than stick to an academic discussion, this panel will revolve around a series of practical scenarios that are designed to be realistic and timely, including situations where counsel is asked to represent both the company and an individual, how and when to disclose uncomfortable facts and inconvenient documents, issues involving changing firms and companies, and multijurisdictional practice. The panel will feature discussion from two experienced in-house lawyers and Dorsey’s Deputy General Counsel. Session B: Managing Rapid Regulatory Change in International Trade and Cross-Border Investment Nathan Brower, Executive Vice President, General Counsel, Nature’s Sunshine Greg Ogunsanya, Senior Vice President, General Counsel and Corporate Secretary, H.B. Fuller Kathryn Wood, Senior Vice President & General Counsel, DecoPac, Inc. Dave Townsend and Lawrence Ward, Dorsey & Whitney LLP This program is designed for attorneys advising on cross-border transactions, international trade, regulatory compliance, and corporate governance matters. Panelists will examine recent developments in U.S. trade and investment law and policy, as well as their impact on international collaborations, corporate compliance, and mergers and acquisitions. The discussion will explore how general counsel and in-house legal teams assess and manage evolving trade-related risks within their organizations. Particular focus will be given to developments during the first two years of the second Trump Administration, including changes in tariff policy, tariff refunds, export controls, economic sanctions, and national security reviews of foreign investment. Through a discussion of regulatory trends and practical case studies, attendees will gain a deeper understanding of the legal risks and compliance obligations associated with cross-border business activities, and hear about practical strategies for advising clients and managing compliance obligations in a rapidly changing trade and investment environment. 9:45 am - 10:45 am CT Session A: The Elon Musk Cases: What Tesla and Twitter Can Teach Your Board of Directors Loren Unterseher, Managing Partner, Oxbow Industries, LLC Shulamite White, Chief Legal Officer and Head of People, Motive Technologies Kirsten Schubert, Tom Swigert, and Jonathan Van Horn, Dorsey & Whitney LLP Recent cases involving Elon Musk and his businesses have had significant impact on principles governing board of directors’ fiduciary duties and corporate processes. This panel will examine recent litigation involving Elon Musk, Tesla, and Twitter, and its effects on the law governing the duties of directors and executives, including the executive compensation and director compensation processes, conflicts that may arise when a single executive has control over multiple businesses, and the ramifications of tweets or other public statements by an executive. Session B: All Eyes on DEI: Managing Diversity Efforts Amid Regulatory Scrutiny and Potential Litigation Maggie Dalton, Senior Commercial Attorney, Cargill; Board Co-Chair, Twin Cities Diversity in Practice Laura A. Vannelli, Legal Counsel, Mayo Clinic Susan Lorenc and Jack Sullivan, Dorsey & Whitney LLP The legal and regulatory landscape surrounding diversity, equity, and inclusion (DEI) initiatives has changed dramatically over the past two years. Law firms and legal departments are continuing to grapple with how to recruit, retain, and develop talent from a wide range of personal backgrounds, in a world where previously accepted recruiting and employment practices are facing increased scrutiny and litigation. This program will provide a practical overview of the current legal regime, including recent federal enforcement actions and litigation trends associated with DEI initiatives. Panelists will discuss practical ways in which organizations can pursue and retain legal talent and increase inclusion while minimizing legal, business, and reputational risk. 11:00 am - 12:00 pm CT Session A: Governance in an Age of Increasing Unpredictability James Chosy, Senior Executive Vice President and General Counsel, U.S. Bancorp Todd Hartman, Executive Vice President and Chief Legal and Risk Officer, Best Buy Co., Inc. Alan Rosselot, Associate General Counsel & Assistant Secretary, Delta Air Lines, Inc. Cam Hoang and Robert Rosenbaum, Dorsey & Whitney LLP More than ever, ensuring that boards are well-informed and forward-thinking is critical to a company’s success. Join our panel of corporate governance experts as they share their experiences advising boards through crisis and unpredictable events; capitalizing on, but also checking, disruptive technologies; and positioning the company to succeed in an environment of shifting government priorities. Session B: A Day in the Life of a Trademark, Copyright & Advertising Attorney: A Hypothetical Case Study Alexander Kim, Vice President and General Counsel, Binks Nate Whitaker, Chief Legal Officer and General Counsel, Crumbl Cathy Dahl and Tiffany Shimada, Dorsey & Whitney LLP What issues are companies facing daily while developing rights in intellectual property, protecting those rights, and staying in compliance with myriad potential issues related to advertising, social media, relationships with influencers, and environmental or governmental claims? This panel will feature two in-house counsel who are navigating these issues, utilizing a hypothetical case study, with the support of two Dorsey attorneys helping to develop a roadmap for meeting business objectives and minimizing the risk of claims. 12:00 pm - 1:15 pm CT Keynote Address Dr. Rebecca Heiss, Stress Physiologist Dr. Rebecca Heiss is a stress physiologist, author, and sought-after speaker who helps audiences transform fear and stress into fuel for greater performance and resilience. Her research has been recognized as “transformative” by the National Science Foundation, and she is the author of two books, Springboard and Instinct. Through her Fear(less) message, Rebecca inspires audiences with practical, science-based strategies to train our brains to work for us – not against us – and navigate change and uncertainty with greater confidence.

Insights

Minnesota Consumer-Fraud Enforcement: Disclaimers Won’t Cure Deception, and Penalties Can Add Up

Misleading advertising claims can lead to costly consequences. In State of Minnesota ex rel. Ellison v. Wall & Associates, Inc., No. A25-2064, 2026 WL 3118291 (Minn. App. Oct. 19, 2026), the Minnesota Court of Appeals recently affirmed a bench trial verdict against a tax-relief company and two executives for violations of the Minnesota Consumer Fraud Act (“MCFA”) and the Minnesota Deceptive Trade Practices Act (“MDTPA”). The decision, which affirmed a substantial restitution and civil penalty judgment, underscores the broad power of the Minnesota Attorney General to act against deceptive sales practices. The decision also offers practical lessons for businesses seeking to reduce liability risks in consumer-facing communications. Background Wall & Associates (“W&A”), a Virginia-based tax-relief company, marketed assistance to taxpayers seeking relief from outstanding federal and state tax liabilities, often with offers in compromise—agreements to settle tax liabilities for less than the amount owed. In its extensive advertising campaigns, W&A represented that its average client received a 90% reduction in their tax debt, that it was a local company with Minnesota offices, that it provided legal services, and that it would “Solve ALL Tax Problems.” In reality, W&A’s promises bore little resemblance to what many clients received. Most of W&A’s clients saw just a 9.5% reduction in federal tax debt and 1.2% in state tax debt. W&A had no permanent Minnesota offices. And W&A provided neither legal representation nor assistance with filing tax returns—those services required referrals to separate firms for an additional fee. All the while, W&A clients paid upfront and recurring fees, including during periods when W&A did no work on their cases. Minnesota Attorney General Keith Ellison sued W&A, its founder and owner Ernest Kenneth Wall, and its president and CEO Patrick Mark Yates, alleging violations of, among other laws, the MCFA and the MDTPA. Following a 12-day bench trial, the district court determined that W&A violated the MCFA and MDTPA through its false and embellished advertising. The district court also held Wall and Yates individually liable for those violations because they directed, participated in, and acquiesced in the violations. The district court ordered injunctive relief, $2.7 million in restitution (with Wall and Yates jointly and severally liable for $1.3 million), and civil penalties of $786,517 against W&A, $415,500 against Wall, and $207,750 against Yates. The district court also awarded over $2.5 million in attorneys’ fees and costs to the state. W&A, Wall, and Yates appealed to the Minnesota Court of Appeals, which affirmed the district court’s decision on October 19, 2026. Although W&A, Wall, and Yates challenged the judgment on numerous grounds, several highlights of the decision provide important takeaways for consumer-facing businesses. Individual Reliance Is Not Required for Statutory Liability W&A argued that Attorney General Ellison had to prove a causal nexus between each violation of the MCFA and MDTPA and the injury to a particular consumer to establish liability. In W&A’s view, this required proof that each injured consumer had personally relied on W&A’s false representation. The Court of Appeals rejected this argument based on the MCFA’s and MDTPA’s plain language, which requires no proof of actual deception or confusion by consumers. The Court of Appeals finally pointed to the Minnesota Supreme Court’s decision in State v. Minnesota School of Business, Inc., which held that when a defendant’s misrepresentations are directed at and affected “a broad group of consumers, proof of direct individual reliance is not required to establish a causal nexus between MCFA violations and the harm suffered by consumers.” 935 N.W.2d 124, 135 (Minn. 2019). The Court of Appeals affirmed, however, that a causal nexus is necessary to support an award of damages under the MCFA and MDTPA. In making that determination, district courts look to various factors, including whether the misrepresentations were “longstanding, pervasive, and widespread in communications directed to consumers,” whether the seller intended and understood that consumers would rely on the misrepresentations, and whether the information was of a kind on which consumers would typically rely. The Court of Appeals’ decision continues Minnesota School of Business’s broad interpretation of liability under the MCFA and the MDTPA. Coordinated marketing campaigns to a “broad group of consumers” may expose businesses to MCFA and MDTPA liability without customer-by-customer proof of injury. That said, a causal nexus remains an element of an MCFA and MDTPA claim, and businesses involved in litigation should build a clear record at trial and on appeal showing how each of the relevant factors bears on the causal-nexus inquiry. Contractual Disclaimers Are Not an Automatic Defense to a Misleading Pitch W&A next argued that disclaimers in its client contracts prevented consumers from claiming they had been misled by its advertising. Reiterating that individual reliance is not required under the MCFA and MDTPA, the Court of Appeals held that a contractual disclaimer does not necessarily defeat a claim based on a conflicting oral representation. And on the facts of this case, the Court of Appeals agreed with the district court that W&A’s contractual disclaimers were insufficient given the extensive misrepresentations by W&A and the unequal bargaining power between it and its customers. This holding confirms that contractual disclaimers are not a cure-all for misleading advertising or sales practices. Businesses should review the entire customer journey, including pre-contract representations, as those representations may survive a contractual disclaimer to the contrary. And if faced with litigation, businesses should build a strong record, both at trial and on appeal, showing why any disclaimer is effective in context. The State Has Broad Authority to Seek Restitution W&A also challenged Attorney General Ellison’s authority to seek restitution under the state’s parens patriae authority to protect residents’ collective interests, arguing that injury to only 228 Minnesotans did not affect a sufficiently substantial segment of the population. The Court of Appeals rejected a simple headcount approach, instead explaining that the state had a legitimate interest in protecting residents’ economic well-being as a whole. In any event, the Court of Appeals held that if restitution was not appropriate under the state’s parens patriae authority, then it would still be appropriate under the Attorney General’s enforcement powers under Minn. Stat. § 8.31. The decision reinforces that the broader and more sustained the deceptive advertising, the stronger the case for restitution to protect Minnesotans’ economic interests. Civil Penalties Accrue Per Violation, Not Per Defendant The Court of Appeals finally rejected W&A’s claim that the Attorney General’s enforcement powers under Minn. Stat. § 8.31 permit only civil penalties of up to $25,000 for each defendant. Rather, the Court of Appeals explained that penalties are limited to $25,000 per violation. Multiple violations can therefore produce substantially greater penalties. The Court of Appeals also rejected the argument that restitution made penalties unnecessary: repaying consumers does not eliminate the need to address gains from deceptive conduct and deter future violations. Final Takeaways Align every consumer-facing communication. Broad and extensive marketing campaigns can expose businesses to stronger enforcement standards under the MCFA and MDTPA, making it critical that consumer communications remain accurate and consistent from the first advertisement through the final sale. Plan for layered enforcement exposure. Penalties under the MCFA and MDTPA can add up quickly: W&A, Wall, and Yates ultimately faced more than $6 million in civil penalties, restitution, and attorneys’ fees. The decision continues a line of Minnesota cases recognizing the Attorney General’s broad consumer-protection authority. Details matter. Although the Attorney General’s enforcement power is broad, it is not boundless. As the Court of Appeals explained, issues of causation, the effectiveness of contractual disclaimers, and the availability of restitution and civil penalties all turn on the specific facts of the case. Effective advocacy at trial and on appeal is critical to developing the facts relevant to liability and damages.

Insights

Observations on the SEC’s 2027 Examination Priorities

The SEC’s Division of Examinations (the “Division”) recently announced its examination priorities (“Exam Priorities”) for fiscal year 2027.1 Although many of the Division’s core areas of focus remain consistent with fiscal year 2026, the 2027 Exam Priorities include notable changes and refinements, which we discuss below, along with other key 2027 examination priorities. Dorsey Observations Renewed focus on economic conflicts of interest. After certain economic-incentive topics received less emphasis in the 2026 Exam Priorities2, the Division has again expressly identified economic conflicts as an examination focus. The 2027 Exam Priorities indicate that the Division will prioritize reviewing advisers’ fiduciary obligations relating to economic conflicts of interest raised by fee rebates, fee and expense calculations, cash management, quid pro quo arrangements, and deposits and withdrawals. Greater emphasis on private-fund practices. Building on the private-fund items in the 2026 Exam Priorities, the 2027 Exam Priorities indicate that the Division will assess private-fund disclosures and controls relating to investment allocations, leverage, affiliated service providers, and fees and expenses. The Division also identified investments in private companies through special purpose vehicles (“SPVs”) and loans provided by private funds and business development companies (“BDCs”) as products the Division will scrutinize. Advisers, particularly private-fund advisers, should evaluate whether their disclosures and compliance programs address these areas. Expanded focus on AI-related cybersecurity risks. While the 2026 Exam Priorities focused on advisers’ use of and representations regarding artificial intelligence (“AI”), the 2027 Exam Priorities specifically highlight AI-enabled cybersecurity threats, including AI-generated phishing and synthetic or “deepfake” voice and video used for social engineering. The shift signals that registrants should consider whether their cybersecurity policies and controls adequately address these evolving threats. New focus on proxy advisory firms. The 2027 Exam Priorities state that the Division will examine advisers that rely on proxy advisory firms, including how those advisers evaluate the firms’ recommendations, assess the bases for those recommendations, identify potential conflicts of interest, and determine whether that reliance satisfies applicable legal obligations. Advisers that rely on proxy advisory firms may wish to consider whether their compliance programs address these areas. Updated focus on Regulation S-P and Regulation S-ID. The 2026 Exam Priorities stated that the Division would engage firms during examinations regarding their progress in preparing incident response programs ahead of the compliance dates for the amendments to Regulation S-P and would examine compliance with the amended rule after those dates. The 2027 Exam Priorities indicate that examinations will focus on whether firms have developed, implemented, and maintained reasonably designed policies and procedures addressing administrative, technical, and physical safeguards to protect customer information and that, in accordance with the amended rule, staff will evaluate response program policies and procedures for unauthorized access to or use of customer information, including customer notification procedures and oversight of service providers. With respect to Regulation S-ID, the 2027 Exam Priorities indicate that examiners will assess whether firms are updating their Identity Theft Prevention Program to address emerging risks, such as those related to AI and stolen credentials. Advisers may wish to consider whether their compliance programs address these areas, as applicable. Summary of Other 2027 Examination Priorities Beyond the developments discussed above, many of the Division’s core examination priorities remain consistent with fiscal year 2026. These include investment adviser fiduciary obligations and compliance programs, examinations of never-examined and recently registered advisers, and cybersecurity and operational resiliency. The Exam Priorities are not exhaustive, and examinations will vary based on each registrant’s business, activities and risks. Advisers should consider the 2027 Exam Priorities in reviewing their compliance programs and preparing for potential examinations, including by: Reviewing risk disclosures and controls. The Division states that, when examining advisers to private funds, it will assess whether investment-related risk disclosures are consistent with fiduciary standards and whether compliance policies, procedures, and controls are designed to address both fund-level and investment-level risks. Reviewing disclosures on allocations, leverage, and affiliated service providers. The 2027 Exam Priorities identify disclosures related to certain investments and allocations, the use of debt and fund-level lines of credit, and the use of affiliated service providers as examples. Confirming the accuracy of fee and expense calculations. The Division states that it will assess the accuracy of fee and expense calculations at both the fund and investment levels, and it identifies fee rebates, cash management, quid pro quo arrangements, deposits, and withdrawals as areas in which economic conflicts of interest may affect the impartiality of advice. Reviewing recommendations of illiquid or hard-to-trade products. The Division states that it will prioritize advisers that recommend products that are difficult to trade, have unusual features, or are illiquid, including loans provided by private funds or BDCs and investments in private companies through SPVs. Confirming that the compliance program is implemented and reviewed. The Division states that it will review compliance program components such as marketing, valuation, and custody, as appropriate, and will typically analyze the annual compliance review. It will also focus on compliance practices when advisers have started advising new asset classes or clients or grown through mergers or acquisitions. 1 SEC Division of Examinations 2027 Examination Priorities. 2 See Dorsey’s Client Alert on the SEC’s fiscal year 2026 exam priorities.