Abuse of the Paycheck Protection Program
One of the components of the CARES Act is the Paycheck Protection Program. This program offers a loan to small businesses that are struggling to stay afloat. The goal is to keep employees on the payroll and provide assistance for other operating expenses such as rent, mortgage interest and utility payments. If a struggling business agreed to these and other guidelines, the loan may not need to be repaid.
Unfortunately, it is coming to light that a number of businesses have applied for this loan even though their financial circumstances are far from dire. Apparently, the offer for a free handout is simply too good to ignore.
Sadly, a small number of Registered Investment Advisors (RIAs) have ponied up to the bar and have accepted very large handouts because they could. Yet, as the investment management industry has been labeled as an essential business, the demand for our services never ceased. While many of us may have experienced a slightly lower revenue stream in recent months, this is normal in our industry. Moreover, the current environment is far better than what we experienced during the tech wreck in 1999 and the recession in 2008. As a side note, Sigma was fortunate to actually increase our staffing when we brought on board a new administrative professional in April.
All comments and suggestions are welcome.
Christopher J. Kress, CFA