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U.S. Securities and Exchange Commission


Litigation Release No. 20249 / August 21, 2007

Securities and Exchange Commission v. Sentinel Management Group, Inc., United States District Court for the Northern District of Illinois, Civil Action No. 07 C 4684 (N.D. IL August 20, 2007)

SEC Sues Sentinel Management Group for Misappropriating, Commingling and Leveraging Client Assets

On Monday, August 20, 2007, the Securities and Exchange Commission filed an emergency action against Sentinel Management Group, Inc. (Sentinel), an investment adviser located in Northbrook, Illinois, seeking to halt Sentinel’s improper commingling, misappropriating and leveraging client securities without client consent in violation of Section 206 of the Investment Adviser Act of 1940.

The Commission's complaint alleges that, for a period of at least several months up to and including the week of August 13, 2007, Sentinel’s advisory clients suffered undisclosed losses and risks of losses as a result of several unauthorized practices engaged in by Sentinel. These include:

  • Pledging securities owned by clients as collateral in order to obtain a line of credit as high as $500 million for Sentinel;
  • Placing at least $460 million of client securities properly belonging in segregated customer accounts in Sentinel’s house proprietary account;
  • Commingling client assets without the ability to verify ownership of particular securities by particular clients; and
  • Providing false client account statements that did not accurately reflect client portfolio holdings or the fact that securities had been encumbered by Sentinel.

The Court entered an order requiring Sentinel to provide a full accounting of client assets and Sentinel’s assets and liabilities within five (5) days. In addition, the Court ordered Sentinel to immediately produce certain brokerage and bank documents in order to begin the process of determining client portfolio holdings and ownership of securities.

The Commission’s complaint also seeks a permanent injunction, disgorgement and civil penalties against Sentinel.

Additional Materials:
Declaration in Support of Emergency Motion
Memorandum in Support of Emergency Motion



Modified: 08/21/2007