Madison Avenue Securities LLC has agreed to pay a fine of $125,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From January 2020 to the present, Madison Avenue allowed its registered representatives to generate consolidated reports through an electronic platform, then distribute or make available those reports to customers.

Personnel in the firm’s home office handled manual entries into that platform, but they were not reasonably trained, resulting in thousands of manually entered, held-away assets being not designated as held away or inaccurately designated as not held away.

Madison Avenue did not update automated data feeds from seven product sponsors into its consolidated reporting platform when it expanded offerings of those sponsors’ products, resulting in thousands of assets not being correctly designated as held away.

In addition, many consolidated reports that included held-away assets did not disclose that the held-away assets may not be covered by the Securities Investor Protection Corporation (SIPC).

The communications that omitted information about held-away assets and SIPC coverage did not provide a sound basis to evaluate the facts concerning customer assets, in violation of FINRA Rule 2210(d)(1)(A). The communications that inaccurately categorized assets as not held away were false and misleading, in violation of FINRA Rule 2210(d)(1)(B).

Further, while Madison Avenue preserved copies of consolidated reports generated by its systems, Madison Avenue did not identify which consolidated reports were distributed or made available to customers out of the approximately 40,000 consolidated reports the firm’s representatives generated during the relevant period.

Finally, the firm did not establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA Rules 2210 and 4511, Exchange Act § 17(a), and Exchange Act Rule 17a–4 with respect to consolidated reports.

Specifically, the firm did not have a process for supervising data manually entered into its consolidated reporting platform and did not establish, maintain, and enforce supervisory procedures reasonably designed to review the content of consolidated reports and to retain copies of consolidated reports distributed or made available to customers.

In February 2024, the firm implemented procedures to supervise manual data entry but not new procedures related to supervisory review and retention of consolidated reports.

Therefore, Madison Avenue violated FINRA Rules 2210, 3110, 4511, Exchange Act §17(a), Exchange Act Rule 17a–4, and FINRA Rule 2010.

For these violations, Madison Avenue was censured, fined $125,000, and has agreed to an undertaking.