Fraud and Abuse in the PPP? Evidence from Investment Advisory Firms
49 Pages Posted: 10 Jul 2020 Last revised: 8 Oct 2020
Date Written: October 7, 2020
This study investigates if fraud and abuse in the Paycheck Protection Program (PPP or the Program) were widespread and predictable using 1,090 large PPP loans made to investment advisory firms registered with the U.S. Securities and Exchange Commission (SEC). We find that an existing, well-established model of investment advisor fraud predicts abnormal PPP loan allocations at a surprisingly similar rate. Advisors receiving abnormal PPP loan allocations had loans approved earlier on average, likely over or understated payroll needs, and were more likely to have a history of past legal and/or regulatory misconduct.
Keywords: Paycheck Protection Program, investment advisors, fraud, COVID
JEL Classification: E61, E65, G21, G23, G38, H32, H81
Suggested Citation: Suggested Citation