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US securities regulator examines state-owned companies that have taken out emergency loans – sources

Band Koh Gui Qing

NEW YORK, May 14 (Reuters)The U.S. securities regulator has asked public companies that have received emergency government loans to prove they are eligible for the funds and has made consistent statements to investors about their need for assistance, said to Reuters two people aware of the request.

The Securities and Exchange Commission (SEC) request for information is the latest sign that federal regulators are cracking down on potential abuse of the $ 660 billion paycheck protection program intended to help small businesses overcome the economic crisis caused by the new coronavirus crisis.

The program, which allows small businesses affected by the pandemic to apply for government-guaranteed forgivable loans, sparked controversy after hundreds of state-owned enterprises, which typically have a variety of ways to raise funds, took out loans. ready.

US Treasury Secretary Steven Mnuchin said the program was not designed for state-owned companies if they had cash, and companies that lied to get the aid could face criminal liability.

The US Department of Justice this month brought its first criminal charges against borrowers it accused of defrauding the program by lying about the state of their businesses and the number of employees.

In recent weeks, the SEC has written to state-owned companies asking for proof that they were eligible for the funds they received, the two sources familiar with the information requests said.

The agency also asked the companies to demonstrate that the information they provided to lenders and the government when seeking loans was consistent with statements they made to investors, one of the sources said. The second source said the SEC’s inquiries were “voluntary.”

It is an offense under US securities law to make statements to investors that are proven to be false or misleading.

The sources declined to be named because the SEC investigations are confidential. An SEC spokeswoman declined to comment.

Reuters could not determine how many companies were contacted by the SEC. A Reuters review this month showed that 41 publicly traded companies that received the emergency aid had enough money to cover basic expenses for two months or more when they requested the funds. Some expressed optimistic outlook even as they sought loans.

Further scrutiny came from New York Attorney General Letitia James, who wrote to 11 major U.S. banks seeking clarification on how they disbursed the funds, Reuters reported this month.

The Massachusetts attorney general also asked banks for information about the program, the Boston Globe reported last month.

(Report by Koh Gui Qing in New York edited by Michelle Price and Matthew Lewis)

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