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

This study investigates the pervasiveness of fraud and abuse in the Paycheck Protection Program (PPP or the Program) using large PPP loans made to 1,090 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 loans were approved earlier in the Program, misstated payroll needs on loan applications, and were significantly more likely to have a history of past legal and/or regulatory misconduct