Fraud and Abuse in the Paycheck Protection Program? Evidence from Investment Advisory Firms

40 Pages Posted: 10 Jul 2020 Last revised: 9 Apr 2021

See all articles by William Beggs

William Beggs

University of San Diego School of Business

Thuong Harvison

University of Arizona, Eller College of Management, Department of Finance

Date Written: April 7, 2021

Abstract

This study investigates the nature and magnitude of abuse in the Paycheck Protection Program (PPP or the Program) using PPP loans made to 2,999 investment advisory firms registered with the U.S. Securities and Exchange Commission (SEC). We show an existing model of investment advisor fraud predicts unusually large PPP loans at a rate similar to actual cases of fraud. Investment advisors abusing the Program were significantly more likely to disclose a history of past fraud and other legal and/or regulatory misconduct. Using a conservative approach, we estimate that more than 6% of the $590 million in PPP funds received by companies in the investment management industry consisted of statutory overallocations to firms abusing the Program. We test a variety of hypotheses to shed further light on the nature of PPP abuse.

Keywords: Paycheck Protection Program, investment advisors, fraud, COVID

JEL Classification: E61, E65, G21, G23, G38, H32, H81

Suggested Citation

Beggs, William and Harvison, Thuong, Fraud and Abuse in the Paycheck Protection Program? Evidence from Investment Advisory Firms (April 7, 2021). Available at SSRN: https://ssrn.com/abstract=3647606 or http://dx.doi.org/10.2139/ssrn.3647606

William Beggs (Contact Author)

University of San Diego School of Business ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Thuong Harvison

University of Arizona, Eller College of Management, Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ 85721
United States

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