Brokerage Firm Review: Madison Avenue Securities, LLC

Madison Avenue Securities, LLC (“Madison Avenue Securities”) (CRD#23224) has many different complaints filed by FINRA (Financial Industry Regulatory Authority), state regulatory organizations, and investors such as yourself. At the Law Offices of Robert Wayne Pearce, we have investigated Madison Avenue Securities, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.

If you believe you have a claim against Madison Avenue Securities, you should strongly consider hiring an investment fraud lawyer. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Can I Sue Madison Avenue Securities?

If you’ve lost money caused by Madison Avenue Securities and/or its employees’ misconduct then the answer is, YES, you can sue Madison Avenue Securities, but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding. Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows very well how you can not only sue Madison Avenue Securities in FINRA arbitration proceedings but WIN that arbitration. The easiest way to know if you have a viable case against Madison Avenue Securities is to call Attorney Pearce at our office at 800-732-2889.

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

What is Madison Avenue Securities?

Madison Avenue Securities (CRD#23224) is a registered broker-dealer. It operates as a full-service independent broker-dealer, providing a range of financial products and services to individual investors and financial advisors.

As a registered broker-dealer, Madison Avenue Securities is subject to regulations and oversight by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It is required to comply with industry standards and regulations to ensure the protection of its clients’ interests.

A failure to comply with industry standards by either its brokers or the firm itself can result in disciplinary actions, fines, or other penalties imposed by regulatory authorities.

Madison Avenue Securities Has Many Different Regulatory Problems 

Madison Avenue Securities’ rapid growth has not been without consequences. There have been approximately 7 state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) for a violation(s) of investment-related rules or regulations. In addition, there have been customer complaints filed against Madison Avenue Securities for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record. 

We have reported and written about these regulatory problems and customer complaints over many years. Madison Avenue Securities is a repeat offender: there are over 7 FINRA-reported proceedings citing the firm with one form of supervisory lapses or another.

A Brief Overview of Some of the Regulatory Problems Madison Avenue Securities Has Faced Over the Years*

Madison Avenue Securities has been repeatedly censured, warned, and fined for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable FINRA Sanctions for its Supervisory Failures are below:

Texas State Securities Board Fines Madison Avenue Securities for Failure to Supervise Sales of Alternative Investments

Brief Overview: The Texas State Securities Board initiated an investigation into Madison Avenue Securities that revealed the firm failed to establish, maintain, and enforce a supervisory system to supervise the activities of its agents relating to the sale of certain alternative investments. FINRA specifically said after adopting different branch office guidelines for one form agent, the firm did not consistently apply an alternative investment account score worksheet, which was used to assess compliance for purchases of alternative investment sales. The firm also failed to create a new tool to monitor for the branch-office specific compliance of alternative investment sales. Texas ordered that the firm pay an administrative fine. The firm was also ordered to comply with the terms of an undertaking with the Board.

FINRA Censures and Fines Madison Avenue Securities for Failure to Supervise Mutual Fund Transactions for Sales Charge Discounts

Brief Overview: Without admitting or denying the findings, Madison Avenue Securities consented to the sanctions and to the entry of FINRA findings that it failed to establish, maintain, and enforce a supervisory system reasonably designed to supervise mutual fund transactions that the firm’s representatives effected through its electronic order entry system to confirm the suitability of the transactions regarding potential available sales charge discounts. FINRA said the firm used a process where firm principals manually reviewed mutual fund transactions submitted through the electronic order entry system the day after the transaction. The firm used an electronic trade monitoring program for the firm’s suitability review of transactions entered into the electronic order entry system, along with a principal’s review of the trade monitoring program’s surveillance alerts. Neither the manual review nor surveillance alert review process allowed for reasonable review of the suitability of customers’ purchases of mutual funds in multiple different mutual fund families resulting in missed sales charge discounts. As a result, the firm was censured and fined $50,000.

SEC Censures and Fines Madison Avenue Securities for Conflicts of Interest Related to Third-Party Compensation Based on Advisory Clients

Brief Overview: The Securities and Exchange Commission initiated an investigation into Madison Avenue Securities that revealed breaches of fiduciary duty in connection with its receipt of third-party compensation based on advisory client investments. According to the SEC, the firm failed to provide full and fair disclosure regarding conflicts of interest associated with its receipt of revenue sharing payments from its unaffiliated clearing broker because of sweeping cash into certain money market mutual funds; fees pursuant to rule 12b-1 under the Investment Company Act of 1940; and revenue sharing payments from its clearing broker for no-transaction fee mutual fund investments.  The SEC also said the firm failed to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its practices concerning cash sweep revenue sharing, mutual fund and money market fund share class selection, and no-transaction fee revenue sharing. As a result, the firm was censured and fined $175,000.

FINRA Censures and Fines the Madison Avenue Securities for Failure to Supervise Dissemination of Consolidated Reports to Customers

Brief Overview: Without admitting or denying the findings, Madison Avenue Securities consented to the sanctions and to the entry of FINRA findings that it failed to have either written procedures or a supervisory system in place pertaining to the creation and dissemination of consolidated reports. The firm distributed approximately 6,800 consolidated reports to customers, and approximately 4,500 of those consolidated reports were generated using templates that allowed for manual entries. Even though most of the consolidated reports contained adequate disclosure, the templates used by 7 representatives did not. The procedures in place relating to consolidated reports that required representatives to  submit templates to the compliance department prior to use and provided for the review of consolidated reports were not consistently enforced and were inadequate, said the SEC. Indeed, thousands of consolidated reports were neither reviewed nor retained by the firm. As a result, the firm was censured and fined $75,000.

FINRA Censures and Fines Madison Avenue Securities for Failure to Supervise Registered Representatives Private Securities Transactions

Brief Overview: Without admitting or denying the findings, Madison Avenue Securities consented to the described sanctions and to the entry of FINRA findings that a registered representative of the firm participated in private securities transactions when participating in the offer and sale of private placement offerings. FINRA said at the time the representative became registered with the firm, he provided written notification to the firm that he was the owner and manager of an entity, which was engaged in a private offering of securities that he participated in selling, and that he intended to form another entity and commence a related private offering. The representative also told the firm that he acted as the portfolio manager with respect to funds raised in the offerings and had an opportunity to profit from the portfolio transactions at the conclusion of the investment period. The firm acknowledged the representative’s association with the issuers of the private placement offerings as an outside business activity but failed to record the transactions in its books and records and failed to supervise his conduct. As a result, the firm was censured and fined.

Why Does Madison Avenue Securities Have So Many Regulatory Problems And Customer Complaints?

Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of many franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.

The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers. 

Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.

These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.

Did Madison Avenue Securities Advisor Misconduct Cause You Investment Losses?

When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. Madison Avenue Securities is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting Madison Avenue Securities without representation with an attorney about their complaints and have their complaints denied.

Related Read: Can You Sue Your Brokerage Firm?

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

Consult With An Attorney Who Recovers Investment Losses Caused By Madison Avenue Securities Today!

The investment loss attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Madison Avenue Securities cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.

Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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