US SEC sues Sentinel Management Group over client assets

LOSSES & LAWSUITS

The firm is accused of fraudulently moving $460 million of client securities from segregated customer accounts to its proprietary house account over a period of seven months. The SEC says Sentinel also pledged customer securities as collateral to obtain a $500 million line of credit facility for its own use.

It maintains that Sentinel commingled client assets without the ability to verify ownership of particular securities by particular clients; and provided false client account statements that did not accurately reflect client portfolio holdings or the fact that securities had been encumbered by the firm.

The SEC said Sentinel's customers suffered undisclosed losses for months before the firm sent them a letter on August 13, claiming it could not return their money without selling their assets at a discounts and incurring losses. The letter also falsely blamed the firm's predicament on the current liquidity crisis. Sentinel filed for bankruptcy four days later.

The US District Court in Chicago entered an order requiring the firm to provide a full accounting of client assets and its own assets and liabilities within five days. Sentinel was also ordered to produce certain brokerage and bank documents immediately, to begin the process of determining client portfolio holdings and ownership of securities. The SEC complaint also seeks a permanent injunction, disgorgement and civil penalties against Sentinel.

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: