FTN Implicated In Failed RIA's Attempts To Alter Its Books

Monday, November 21, 2011 07:42
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FTN Implicated In Failed RIA's Attempts To Alter Its Books

Tags: fraud

The SEC has gone to First Tennessee National's brokerage unit in order to collect about $1.5 million clients of failed RIA Sentinel Management are owed.

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The main arc of Sentinel's failure follows plenty of other financial firms that got in over their heads with privately placed securities that simply weren't liquid enough.

 

However, this case has a few details that set it apart from the near-demise of Securities America, for example.

 

Sentinel management took on added leverage around the illiquid notes it was selling its clients, so its bets went sour a lot earlier.

 

All the way back in 2005, the company's balance sheet was looking overly strained. So over the next few years, they wheedled their broker, FTN, into "borrowing" the notes to make the books look cleaner.

 

FTN employees suspected that the move would bend regulations, but they let it go through anyway.

 

The SEC estimates that in allowing those transactions, FTN cost Sentinel clients about $150 million -- 10% of their AUM held with the firm -- and so now needs to pay that money back.

 

Sentinel went bust in 2007.

 

 

 

 

 

 

 

 

 

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