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Matthias Knab, Opalesque:

A recent SEC enforcement action serves as a pointed reminder that fair value obligations for investment advisers do not pause during market disruptions - they become more critical.

On February 25, 2026, the Securities and Exchange Commission issued an administrative order against Madison Capital Funding LLC (IA Release No. 6948), a Chicago-based registered investment adviser and wholly-owned subsidiary of a large life insurance company. With approximately $3.7 billion in regulatory assets under management at the time, Madison Capital agreed to a $900,000 civil penalty and a cease-and-desist order, without admitting or denying the findings.

What Happened Madison Capital's core business was originating senior loans for private equity sponsors acquiring lower-middle market companies through leveraged buyouts. It would typically hold those loans for 30 to 60 days before selling portions to pooled investment vehicles it also managed and advised - a classic principal transaction structure.

The Funds' advisory agreements and PPMs were explicit: loans sold by Madison Capital to its Funds would be priced at "fair value" or "fair market value as reasonably determined by Madison Capital." The firm's own valuation policy allowed for "market adjustments in Madison's sole discretion." An independent review agent was engaged by the Funds to provide consent to each principal transaction - but critically, that agent relied ent......................

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