$ 36 million in PPP loans received by RIAs violated loan limits: study

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New reports show that the paycheck protection program loans guaranteed by advisers and facilitated by fintech companies involved malpractice.

More than 6% – or $ 36 million – of the $ 590 million in PPP funds received by players in the investment management industry violated loan limits set out in the CARES Act, according to new research.

The to study, “Fraud and Abuse in the Paycheck Protection Program?” Evidence From Investment Advisory Firms, ”revealed that nearly a quarter of SEC-registered investment advisers eligible for PPP funds – 2,999 out of 12,643 – have received loans totaling more than $ 590 million.

The research was first reported by InvestmentNews.

“While professional services, such as investment advice, were relatively isolated from full shutdown operations during the pandemic due to the possibility of operating remotely, investment management firms suffered significant negative shocks on revenues immediately prior to the deployment of the PPP, ”say 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.

Beggs and Harvison estimate that “companies that have taken on unusually large loans have been over-allocated by around $ 36 million, or about 6%, of the total PPP dollar amount received by the industry.”

According to the report, advisers received loans that were much larger than payroll needs, and advisers who abused the program were also “significantly more likely” to disclose a history of fraud and / or regulatory misconduct.

Another report published Tuesday by the University of Texas at the McCombs School of Business in Austin found that more than 45% of PPP loans from fintech lenders were deemed impaired.

Research has found that fintech lenders have increased their PPP loan market share to over 70% of issued loans by April 2021, and that fintech loans are more than 3.5 times more likely to be initiated by someone with a criminal history.

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