SEC Investigating Public Disclosures by PPP Recipients

May 19th | 2020

On May 14, 2020 law firm Bryan Cave Leighton Paisner reported that the Securities and Exchange Commission’s (“SEC”) Division of Enforcement has initiated inquiries into several issuers and regulated entities that publicly disclosed their receipt of funds from the SBA’s Paycheck Protection Program (PPP). It is a rumor that the SEC is conducting a sweep type of investigation as to whether recipients’ excessively positive or insufficiently negative statements in recent 10-Qs may have been inconsistent with certifications made in PPP applications regarding the necessity of funding. JDSUPRA reported on May 18th, 2020 that “in light of this scrutiny, public entities that received PPP Funds may wish to compare statements in their recent SEC filings concerning financial performance and liquidity with statements in their PPP applications.” SEC Actions, a publication about SEC investigations, stated on May 19, 2020 that “since many SEC fraud actions center on the company failing to comply with its representations and/or policies or for not making the full and complete disclosures, proper preparation for any discussion with the staff is key.” While these matters raised continue to be considered rumors, the advice remains constant, double check your public disclosure documentation against your PPP application and beware of and prepare for any informal conversation with the SEC on this topic.

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