Charges Filed Against Firm That Serves Futures Market

CHICAGO -- The Securities and Exchange Commission filed civil fraud charges Monday against the Sentinel Management Group, the cash management firm serving the futures market that filed for bankruptcy protection Friday, according to Reuters.

In a complaint filed in Federal District Court in Chicago, the SEC accused Sentinel of defrauding clients by improperly commingling, misappropriating and leveraging their securities without their knowledge in violation of the Investment Advisers Act. The agency also asked the court for an emergency temporary restraining order, Reuters reported.

According to the complaint, the SEC accused Sentinel of transferring at least $460 million in securities from client investment accounts to Sentinel’s proprietary house account, Reuters reported. Sentinel also used securities from client accounts as collateral to obtain a $321 million line of credit as well as additional leveraged financing, the SEC said in the complaint.

The complaint also accused Sentinel of not telling clients that it was commingling the funds, which involved transferring and misappropriating their assets. Sentinel failed to inform them that their investment portfolios were highly leveraged as a result of the financing activities, the SEC said, according to Reuters.

Sentinel did not return a call seeking comment; its lawyer, Ronald Barliant, did not respond to an e-mail message, according to Reuters.

-- NYSSCPA.org News Staff

Posted on 8/21/07