SEC Charges Illinois Investment Adviser for Breaching Its Fiduciary Duty and Contravening Its Disclosures

ADMINISTRATIVE PROCEEDING
File No. 3-22599

February 25, 2026 – The Securities and Exchange Commission today announced settled charges against Madison Capital Funding LLC, an Illinois-based formerly registered investment adviser, for selling loans to private fund clients (“the Funds”) without reasonably determining whether those trades were at fair market value, contrary to its obligations under its advisory agreements and representations to investors.

According to the SEC's order, Madison Capital originated certain senior loans for private equity sponsors acquiring lower-middle market companies and sold portions of those loans to the Funds, typically after holding them for thirty to sixty days. The SEC’s order finds that the Funds’ advisory agreements and disclosures to investors stated that Madison Capital would price the principal transactions at fair value as reasonably determined by Madison Capital. Madison Capital’s practice, according to the order, was to use the par value of the loans less the unamortized loan fee as the fair market value and sale price of these recently originated loans. The order further finds that between March 2020 and May 2020, at the outset of the coronavirus pandemic and during a disruption in the financial markets, Madison Capital continued to sell performing loans it originated before the market disruption but failed to determine the effect of the market disruption on the fair market value of those loans. Madison Capital therefore breached its fiduciary duty to the Funds and failed to act in accordance with the disclosures to investors, according to the SEC order.

The SEC’s order finds that Madison Capital violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-8 thereunder. Without admitting or denying the findings, Madison Capital agreed to pay a $900,000 penalty to the SEC. Madison Capital also agreed to a censure and cease-and-desist order.

The SEC's investigation was conducted by Ryan Suniga of the Chicago Regional Office along with Jonathan Katz of the Division of Enforcement’s Asset Management Unit, and supervised by Jeffrey Shank and Corey Schuster of the Asset Management Unit.