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Client Alert

Bank Regulatory Reform Arrives – Gingerly

May 31, 2018

by Joseph Lynyak and Nicholas A.J. Vlietstra

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On May 24, 2018, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Reform Act”).1

The bulk of reform in the Reform Act consists of the elimination of many technical and regulatory-overreach problems caused by the Dodd-Frank Act of eight years ago. The Reform Act is striking for what it does not do – it passes on dismantling the Consumer Financial Protection Bureau’s reach. Perhaps the most significant reform is that the Act prospectively raises the so-called “SIFI” (systemically important financial institution) level for enhanced prudential regulation from $50 billion to $100 billion immediately, and from $100 billion to $250 billion in 18 months. This change will reduce compliance costs for a large number of banks, and will likely inspire a wave of bank consolidation where such consolidation does not create SIFI status.

The Reform Act also provides a statutory exemption for small banks from the Volcker Rule. (With that statutory exemption in place, on May 30th the federal banking agencies issued a proposal to amend the Volcker Rule.) The Reform Act may pave the way for a great deal of regulatory relief through the administrative process.

This Alert provides: (a) a short history of the legislative process leading up to the Reform Act; (b) a summary by category of the Reform Act’s most significant provisions; and (c) an analysis of how financial regulatory reform may proceed over the next 12-month period.2 

A. Short History

From an historical perspective, whenever Congress has adopted comprehensive financial legislation intended both to respond to and contain a financial crisis, numerous legislative drafting mistakes are made that require repair in subsequent legislation. This typically occurs two or three years after the comprehensive financial legislation becomes effective—and is usually deemed to be consensus legislation on the part of both the House and Senate and the two parties.

In the case of the Reform Act, however, corrective legislation did not meet this time-frame because of the fear (possibly justified) on the part of Democrats that the Republican-controlled Congress would eviscerate the Consumer Financial Protection Bureau (the “CFPB”). Those fears were confirmed by the House when it adopted Chairman Hensarling’s Choice Act, which rolled back many of the prudential regulatory standards of the Dodd-Frank Act, and emphasized wholesale dismantling of the consumer protection authority of the CFPB (leaving it arguably less effective than its older cousin, the FTC).

Following the passage of the Choice Act in the House, Senate Democrats indicated that the Choice Act was a non-starter in that chamber.  In response, Republican Senator Mike Crapo, the Chairman of the Senate Committee on Banking, Housing and Urban Affairs, negotiated a small, moderate list of consensus Dodd-Frank Act corrective measures acceptable to the Democratic minority, which notably sidestepped dismemberment of the CFPB. 

Subject to only one provision directed at assisting large banks, Senator Crapo was able to convince several moderate Senate Democrats to support the Reform Act by emphasizing regulatory relief aimed at smaller community banks. Notwithstanding the House view that more aggressive reform measures should be considered, the House leadership adopted the Senate version of the legislation and sent the enrolled bill to the President for his signature (thus avoiding the necessity of a conference committee).

B. The Reform Act as Adopted

As noted above, the Reform Act was carefully negotiated by Senator Crapo to achieve consensus with moderate Democrats in the Senate by adopting several small regulatory relief measures correcting several problems arising from the Dodd-Frank Act. Accordingly, a fair reading of the range of reforms is that they consist primarily of the elimination of many technical and annoying overreach problems caused by the Dodd-Frank Act.

A summary of more significant provisions of the Reform Act – broken down into several categories – is as follows:

i. Regulatory Relief for Large Banks

Perhaps the most significant regulatory relief provision, Section 401 of the Reform Act prospectively raises the so-called “SIFI” (systemically important financial institution) level for enhanced prudential regulation from $50 billion to $100 billion immediately, and from $100 billion to $250 billion in 18 months. This change potentially saves smaller SIFIs no longer subject to enhanced prudential regulation collectively hundreds of millions of dollars in compliance costs (and reduces the number of SIFIs by approximately two-thirds).3  

As discussed in greater detail below, this increase in the level at which enhanced prudential standards would now apply may result in a wave of bank consolidations—not only among the SIFIs who will now fall well below the new minimum level, but among larger banks who have been hesitant to enter into consolidations lest they lose potential economies of scale due to increased compliance costs as the SIFI level is approached.

ii. Various Capital Calculations

The Reform Act includes several tailored modifications to capital calculations and related requirements for several categories of banks and holding companies, as follows:

  • Capital Relief for Custodial Institutions. Section 402 of the Reform Act provides capital relief for large custodial bank holding companies and their insured subsidiaries that “predominantly engaged in custody, safekeeping, and asset servicing activities.” For those entities, fiduciary and trust accounts will no longer be subject to the supplementary leverage ratio as calculated based upon Federal Reserve Board capital regulations. 
  • Municipal Securities Deemed High Quality Assets. Section 403 directs the federal banking agencies to amend their liquidity coverage ratio regulations to treat certain municipal securities as high quality assets—and thereby lower the capital risk retention requirement for banks holding those assets.

iii. Regulatory Relief for Smaller Banks

In order not to leave out smaller, community banks that have suffered by the trickle-down effect of enhanced prudential regulation imposed by bank regulators, the Reform Act adopts several provisions aimed at reducing the regulatory burden on smaller community banks, including the following:

  • New Community Bank Leverage Ratio. Section 201 of the Reform Act requires that the federal banking agencies establish a community bank leverage ratio of tangible equity to average total consolidated assets of not less than eight percent and not more than ten percent. Banks with less than $10 billion in total consolidated assets that maintain tangible equity in an amount that exceeds this new community bank leverage ratio will be deemed to be well capitalized and in compliance with risk-based capital and leverage requirements.
  • Elimination of the Volcker Rule to Smaller Banks. Section 203 eliminates the application of the Volcker Rule for banks with assets below $10 billion and total trading assets and trading liabilities that are not more than five percent of total consolidated assets.
  • Shortened Call Reports and Extended Examination Cycle. Sections 205 and 210 modify two burdensome reporting requirements for smaller banks, by mandating that banks below a $5 billion threshold in consolidated assets be allowed to use a shortened Call Report, and increased from a $1 billion to a $3 billion threshold below which the 18-month examination schedule would apply.4
  • Expanded Scope of the FRB’s Small Bank Holding Company Statement. In a technical change that could assist many small banks, Section 207 raises the consolidated asset threshold of the Federal Reserve’s Small Bank Holding Company Policy Statement (the “Policy Statement”) from $1 billion to $3 billion.5

iv. Consumer Laws and Operations

The Reform Act is also noteworthy for what it does not broadly address—namely the structure and authority of the CFPB. However, several industry-friendly provisions in the consumer arena and retail operations were adopted, as follows:

  • Mortgages Held in Portfolio by Smaller Banks and Credit Unions. Because of the liability that arises by not making a mortgage loan that qualifies as a “qualified mortgage” or “QM” under the Truth-in-Lending Act and the CFPB’s implementing Regulation Z, smaller community banks have been extremely reluctant to originate non-QM mortgages. Section 101 corrects this problem by providing that certain mortgage loans that are originated and retained in portfolio by an insured depository institution or an insured credit union with less than $10 billion in total consolidated assets will be deemed QMs.6
  • Modification of TILA’s 3-day Waiting Period. Section 109 eliminates the TRID 3-day waiting period if the lender extends a second offer of credit that has a lower annual percentage rate.7
  • HMDA Reporting Relief. Small volume mortgage loan originators (i.e., originating less than 500 closed-end mortgage loans or 500 HELOCs in each of the two preceding years) are exempt from reporting the expanded HMDA disclosures created by the Dodd-Frank Act. This will exempt a large percentage of financial institutions on a go-forward basis.8
  • TILA Relief for Loan Originators. Due to the time delay created when a loan originator (“LO”) switches employment, that individual was precluded from working in the capacity of an LO while his/her LO license was transferred (primarily through the NMLS registration system). Section 106 provides a 120-day period during which the LO may continue working while the subject license is processed.9
  • Online Banking and Identity Theft. Section 213 allows banks and credit unions to utilize information from a driver’s license or an identification card when opening new accounts for customers when an application is made through the internet or a mobile banking application. 
  • TILA Escrow Relief. Section 108 exempts insured depository institutions and insured credit unions with less than $10 billion in assets from TILA’s escrow requirements.
  • Manufactured Home Exemption.  Section 107 excludes from the definition of “mortgage originator” an employee of a retail manufactured home seller who does not receive compensation or gain for taking residential mortgage loan applications.
  • Preemption of State Credit-Freeze Laws. Section 301 preempts state credit-freeze laws and adopts a national standard for placing and removing credit freezes, including a direction to the FTC to coordinate the process by creating a webpage to access credit reporting agencies.

v. Miscellaneous

In addition to the categories described above, the Reform Act has numerous individual provisions that are minor in nature, technical and non-controversial. They include, among others: (a) several reports required to be prepared by various federal agencies; (b) relief from the FDIC’s reciprocal deposit rule; (c) increasing the mutual saving association size to allow those institutions to operate as a national bank without switching charters; (d)  expanding the definition of a 1-to-4 family dwelling for credit unions; (e) instructing the Social Security Administration to create a database to assist in preventing identity theft; (f) instructing that certain Acquisition, Development, and Construction (“ADC”) loans that meet specified criteria will not be subject to a heightened risk weighting under the banking agencies’ risk-based capital rules; (g) relieving some disclosure burdens for issuers that offer securities to employees through compensation plans; and (h) raising from 100 to 250 the number of investors in a “qualified venture capital fund” that is exempt from SEC registration.

Finally, the Reform Act adopts several procedural protections for veterans and consumers, including: (1) modifying consumer reporting information on certain debt incurred by a veteran; (2) protecting veterans from predatory action relating to refinancings; (3) expanding for one year the stay on foreclosure for a veteran after the veteran’s service ends; (4) providing protections for whistleblowers for senior abuse; (4) permanently reinstating the Protect Tenants at Foreclosure Act; (5) requiring that Fannie Mae and Freddie Mac establish a process for validating credit scoring models; and (6) enhancing protections for student borrowers.

C. Observations 

We offer the following initial observations:  

First, in regard to regulatory reform going forward, virtually every corrective measure included in the Reform Act requires rule-making by the federal banking agencies. That is because in many instances the Reform Act’s provisions directly modify or negate existing regulations currently in effect that will require notice and comment. This process will likely take the remainder of 2018 (and probably extend well beyond). 

However, the Reform Act is extremely compatible with the report issued by the Department of the Treasury in June of 2017, in which numerous administrative actions were identified that could significantly ease the compliance burden on banks and their affiliates.10 

The Reform Act, therefore, could be a prism through which rulemaking might be accelerated. For example, joint agency rulemaking is extremely difficult—modifying existing joint agency rules seemingly impossible. However, with the statutory exemption for small banks from the Volcker Rule now in place, the federal banking agencies announced a proposal to amend the Volcker Rule. The Reform Act may ultimately have a similar salutary effect on regulatory relief through the administrative process.11  

Second, we note that the most significant statutory change—the increased SIFI floor—may occasion a wave of merger activity in the banking sector. Over the past several years, medium to larger-sized bank holding companies and banks have been reluctant to make strategic acquisitions of other larger-sized institutions because of the regulatory penalty associated with exceeding the SIFI level (and incurring enhanced prudential scrutiny). As a result of the SIFI asset floor increase, the opportunity may be available for expanded interstate acquisitions and enhanced economies of scale— with diminished risk management obligations. 

1 S.2155 
2 Although most of the provisions of the Reform Act are immediately effective, due to the necessity of modifying or issuing new regulations, it will be incumbent upon the banking agencies to provide guidance regarding compliance as soon as possible.
3 Foreign banks with greater than $100 billion in total assets will not qualify for this expanded relief.
4 The 18-month exam cycle would only apply to community banks that are well managed and well capitalized.
5 The Policy Statement permits small bank holding companies and saving and loan holding companies to hold a higher level of debt than is generally permitted for holding companies (and facilitates acquisition strategies).
6 Certain documentation and other requirements are necessary.
7 In a criticism of the CFPB’s former leadership, Section 109 also includes a statement urging the CFPB to issue reliable guidance in this complicated area.
8 Note that the data will still be required to be gathered by exempted entities, and the exemption is lost if the institution’s CRA rating is “needs to improve.”
9 Section 106 also extends civil liability protection to government officials who make good faith errors related to the collection, furnishing, or dissemination of information with respect to people registered with the NMLS.
10 A Financial System That Creates Economic Opportunities—Banks and Credit Unions—A Report to President Donald J. Trump.
11 With the confirmation of the Administration’s nominee to head the FDIC, President Trump’s financial services leadership is now completely in control. The Administration now owns regulatory relief, and excuses for delays based upon Obama hold-overs in key agency positions no longer apply.

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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.

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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. 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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 Celebrates Pro Bono Week and Honors Attorneys and Business Professionals for Impactful Pro Bono Work

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.

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Insights

2027 IARD Renewal Program Deadlines

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.

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.