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To: Bucky Katt who wrote (35633)	8/21/2007 9:36:53 AM
From: Bucky Katt	Read Replies (1) \| Respond to of 48461

SEC accuses Sentinel of fraud> Suit: Firm put clients at risk of serious loss>> The Securities and Exchange Commission on Monday accused Northbrook-based Sentinel Management Group of fraud and misappropriation of clients' assets, including using customers' securities to obtain a loan of up to a half-billion dollars. "Sentinel's fraudulent conduct has placed its clients at risk of serious and irreparable loss," the lawsuit said. Sentinel, an otherwise low-profile player in the vast field of specialized cash management, was thrust into the spotlight last week when it closed its doors to customers. This came during the global credit crunch that caused markets to shudder. Regulators swarmed over Sentinel's office for much of last week, and the firm entered bankruptcy Friday. On Monday the SEC made a dramatic accusation: Sentinel was commingling funds and borrowing against those funds for at least several months in violation of federal law. Securities used as collateral could be sold as early as Wednesday by the Bank of New York Mellon, the SEC warned. In its lawsuit filed in federal court, the SEC outlined what it said was a scheme to use Sentinel's clients' assets as collateral for loans it received. The SEC said Sentinel secretly transferred at least $460 million of its clients' assets into the company's in-house trading account. This occurred at least several months prior to its financial trouble becoming public last week. It used those assets to obtain loans from the Bank of New York, the lawsuit says. "The credit extended under this line of credit reached as high as $500 million in June 2007 and is now $321 million," the SEC said. This was not the first time Sentinel had used its clients' assets to obtain loans, according to a witness interviewed by the SEC. "A representative of Sentinel told a member of the SEC's examination staff that since 2004 Sentinel had used $1.5 billion in securities owned by the clients to obtain financing totaling three times the value of those securities," the SEC said. The SEC said "that the financing was used to purchase additional securities." An attorney with the agency declined to elaborate on what Sentinel did with the money. Sentinel's clientele included futures brokers, hedge funds and well-to-do individuals. On its Web site, now dismantled, the company promised investors total safety, saying the company put money only into government or top-rated corporate securities. On Aug. 13, Sentinel told its clients it would no longer honor requests for withdrawals, in effect freezing the accounts. Many of Sentinel's customers are futures brokers, who must have immediate access to funds to meet their financial commitments. Commodity regulators warned Monday that a dozen futures brokers with Sentinel accounts could go out of business shortly if they can't access their money. Sentinel's bankruptcy makes it unclear when the brokers can access money in their accounts. Sentinel had said it would be forced to sell client securities at a loss if it honored withdrawals, blaming market volatility.