Sentinel Financial Settles with NASD Over Market Timing Charges

As per the agreement, Sentinel will pay $659,674 in restitution to the three funds affected by the market timing. These are the Sentinel International Equity Fund (which will receive $645,631), the Sentinel Bond Fund ($10,098), and the Sentinel High Yield Bond Fund ($3,945). While willing to settle the charges, Sentinel neither admitted nor denied the charges.

The NASD inquiry into trading practices at Sentinel spanned from October of 2000 until October of 2003, and found that systems at Sentinel could only detect market timing after the fact. Often times, clients could get another account once they were caught and repeat the transgression. Sentinel also left primary review of the firm’s excessive trading surveillance data to its wholesalers and non-compliance personnel.

NASD also found that prior to adopting its Excessive Trading Policy in October of 2000, Sentinel entered into understandings with two brokers, permitting them to engage in a certain amount of market timing, and continued to allow such practices after the adoption of the policy. The NASD also contends that Sentinel failed to establish and maintain a system that adequately monitored and prevented market timing, which was prohibited by the funds’ trading policies. It also found that Sentinel failed to preserve internal emails as required by federal securities law, as well as NASD rules.

As part of the settlement, NASD is requiring Sentinel to certify that it has disclosed all known instances of market timing in its funds, as well as institute measures that will prohibit such activity in the future.

The Sentinel agreement comes as part of a long line of mutual fund companies that have been caught in the dragnet of federal and state regulators intent on weeding out abusive trading practices in the industry, which started last year with the investigation of the hedge fund Canary Capital Partners (See Ripples of Canary Fund Trading Probes Continue to Spread ).