Federal regulators filed civil fraud charges against Sentinel Management Group, accused of fraud and misappropriation of clients’ assets, including using customers’ securities to obtain a loan of up to a half-billion dollars.
The Securities and Exchange Commission arraigned Sentinel for misleading clients by providing wrong information about the market value and selling securities without their knowledge in violation of the Investment Advisers Act. In the complaint, the SEC accuses Sentinel for transferring at least $679.5m in securities from client investment accounts to Sentinel’s proprietary “house” account. Sentinel also used securities from client accounts as collateral to obtain a $321m line of credit as well as additional leveraged financing.
SEC alleges that Sentinel’s fraudulent conduct has placed its clients at risk of irreparable loss. Sentinel officials didn’t comment on the SEC action.
Earlier, Sentinel has filed for Chapter 11 bankruptcy protection, as two of its customers, Farr Financial Inc. and Velocity Futures, filled a petition against Sentinel’s decision of selling assets at below market rates and without obtaining the needed approval.
Via: USA-Today
