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FINRA Starts Probe of Reps' PPP Loans

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The Financial Industry Regulatory Authority is zeroing in on registered reps’ use of Paycheck Protection Program loans.

“FINRA is proactively looking at registered representatives that obtained loans through undisclosed outside business activities,” a spokesperson said Monday in a statement shared with ThinkAdvisor. “It is core to FINRA’s mission to detect, deter and investigate potential fraud.”

The spokesperson also stated that FINRA is not targeting such loans via examination letters.

The Wall Street Journal and Bloomberg reported last year that JPMorgan and Wells Fargo had terminated their registered reps for inappropriately taking PPP loans and/or taking PPP loans through undisclosed outside business activities.

SEC Exam Sweep

The Securities and Exchange Commission last May started an exam sweep of public companies that had received funds from PPP loans.

The agency’s enforcement division in Washington began making voluntary inquiries regarding information that would demonstrate qualifications to receive a PPP loan, including the impact of COVID-19 on the business, among other related document and information requests, according to a person who had seen a letter the SEC sent regarding its probe.

Ivan Knauer, partner at Snell & Wilmer LLP in Washington, told ThinkAdvisor then that advisors that had applied for and received PPP funds should ”not be surprised if OCIE examiners raised questions about this during their next examination. But as of now, it appears the inquiry by the [SEC] enforcement division is focused on public companies.”

Jim Lundy, partner in Faegre Drinker’s Chicago office, told ThinkAdvisor last May that he believed it likely that the SEC ’s exam division would conduct a sweep of advisors’ use of PPP loans.

A request for comment on such a sweep of advisors’ PPP loans was not returned by the SEC as of Monday afternoon.


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