Daniel P. Stipano and Jonice Gray Tucker discussed "The questioning begins: Potential liability under the Paycheck Protection Program" at an American Bar Association Banking Law Committee webinar
The Paycheck Protection Program (PPP) was enacted on March 27, 2020 as part of the CARES Act. It is a small business lending program under the Small Business Administration’s Section 7(a) authority that provides for government-guaranteed loans to be made through a private lender, and was designed to provide a direct incentive for small businesses to keep their workers on the payroll. Further, the SBA will forgive the loans made under the program if employees are kept on the payroll for a certain period of time and the money is used for payroll, rent, mortgage interest, or utilities.
There has been considerable press coverage surrounding PPP, and borrowers and lenders may be wondering about their potential liability under the program. Particularly for borrowers that are broker-dealers, investment advisers, or public companies, there may be hard questions from investors and the SEC/FINRA about participation in the program or statements made in securities disclosures.
This webinar discussed potential liability related to participation in PPP from the perspectives of bank and non-bank lenders, general commercial borrowers, and borrowers subject to regulation under the federal securities laws. Among other topics, it explored the making of statements that are subject to the False Claims Act and the risks of inconsistencies between statements made in loan documentation and securities disclosures.