The U.S. Securities and Exchange Commission (SEC) has launched an investigation into publicly traded companies that received COVID-19 stimulus funds, Bloomberg News reported.
Agents are looking into whether the companies’ loan applications for the Small Business Administration (SBA’s) Paycheck Protection Program (PPP) were consistent with the disclosures made to investors in SEC filings, the news service reported.
The Commission’s enforcement division has sent letters to some recipients of the forgivable loans seeking information about how the funds were spent and copies of loan applications, sources told Bloomberg.
The news service reported that nearly 200 public companies received PPP funds at that level, but the SEC’s inquiry encompasses fewer than a dozen of those firms.
The inquiry is still in its early stages. Judy Burns, an SEC spokeswoman, declined to comment.
“It’s no surprise that the SEC will want to line any such representations up against what the same companies are telling investors in SEC filings and elsewhere,” said Stephen Crimmins, a former SEC enforcement lawyer.
Congress approved the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act in March, with an initial $376 billion reserved for small businesses. The second round of funds brought the total SBA loans to $659 billion.
Earlier this month, Steven Peikin, the SEC’s co-director of enforcement, said his division had formed a steering committee to coordinate COVID-19-related enforcement activities.
“Like our colleagues across the Commission, we in the Division of Enforcement have focused significant time and resources on responding to COVID-related matters,” he said. “In organizing our response, we have looked to the experiences had, and the lessons learned, by our predecessors in other periods of emergency and serious market disruption, including the September 11 attacks and the 2007-08 global financial crisis.”
Last month, PYMNTS reported that Treasury Secretary Steven Mnuchin said any business getting an emergency coronavirus loan from the SBA of greater than $2 million will be subject to an audit.
“One of the things that will be required is you will have to show a payroll report that you actually spent the money on payroll and other items that qualify for forgiveness,” he said at the time.