What You Need to Know
- Advisors received loan amounts much greater than payroll needs.
- Advisors abusing the program were also significantly more likely to disclose a history of past misconduct.
- More than 45% of fintech lenders’ loans were deemed questionable.
New reports show Paycheck Protection Program loans secured by advisors and facilitated by fintech firms involved misconduct.
More than 6% — or $36 million — of the $590 million in PPP funds received by those in the investment management industry violated loan limits as set out in the CARES Act, according to new research.
The study, “Fraud and Abuse in the Paycheck Protection Program? Evidence From Investment Advisory Firms,” found that nearly a quarter of SEC-registered investment advisors eligible for PPP funds — 2,999 out 12,643 — received loans totaling more than $590 million.
The research was first reported by InvestmentNews.
“While professional services, such as investment advice, were relatively insulated from completely shuttering operations during the pandemic due to the ability to operate remotely, investment management firms realized substantial negative shocks to revenue immediately prior to the rollout of the PPP,” state the authors, William Beggs of the University of San Diego and Thuong Harvison of the University of Arizona, Eller College of Management, Department of Finance.