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.
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