According to FINRA, MML Investors Services, LLC was censured and fined $700,000 for failing to reasonably supervise the process of representatives creating consolidated reports for customers.

Consolidated reports combine information from multiple investment accounts into a single statement for customer convenience. These reports can include accounts held at the broker-dealer and outside accounts, with outside account information sometimes entered manually by representatives.

MML Investors' supervisory system failed to alert supervisors when representatives made manual entries in consolidated reports or failed to upload documentation supporting manually entered valuations. While the firm required supervisors to review draft reports before delivery to customers, this review did not include verification of manually entered assets.

The firm also had no system to prevent representatives from making account information available to customers online before supervisory review occurred.

These supervisory gaps enabled one representative to enter fictitious brokerage accounts purportedly held at the firm into the consolidated reporting system. The firm failed to detect that this representative was using falsified data because it did not review manual account entries as required.

Following the discovery, the firm compensated customers for damages related to the representative's actions and improved its supervisory systems.

This case demonstrates the risks of consolidated reports with manually entered data. Investors should verify that account information on consolidated reports matches actual account statements from their financial institutions. Discrepancies could indicate data entry errors or, in rare cases, fraud.