Monday, February 6, 2017

Sentinel Growth Fund Management and Mark Varacchi: Even Rich People Should Stick With Registered Financial Advisors.

On Thursday, February 2, 2017, the SEC filed a civil complaint in Connecticut federal court against Mark J. Varacchi and Sentinel Growth Fund Management, alleging that the defendants misappropriated at least $3.95 million of investor assets at two private funds the defendants advised/managed.  According to the complaint, the defendants used investor money for personal and business expenses, and to pay prior investors, which would be a Ponzi scheme.  This violated defendants’ fiduciary duty to their clients.

Sentinel’s purported business model was to provide a platform for investors to “invest with up-and-coming hedge fund managers.”  The defendants claimed to have a “master fund that included multiple series managed by the [designated hedge fund managers].  Investor funds either were never invested in the designated hedge funds, or redeemed without authorization. 

The SEC seeks disgorgement and penalties against Varacchi and Sentinel, and also named two hedge funds in an attempt to recover investor assets allegedly in those funds’ possession. 

Neither Sentinel Growth Fund Management, nor Mark Varacchi are registered representatives in the Central Registration Depository, which is the database FINRA maintains of all individuals who are financial advisors (either broker-dealer agents or investment adviser representatives).  As a result, neither appear when search on FINRA’s broker-check website:  Nor do either appear on SEC’s Investment Adviser Public Disclosure website:

It is easy to post a website claiming your firm as the “Best Emerging Manager Managed Account Platform 2016.”  It is much more difficult to take the FINRA Series tests required in order to become a registered financial advisor.  While investing with any given registered persons is no guarantee as to honesty or market returns, placing investor funds with unregistered persons is the single easiest way to lose money in investing.  This is true whether you are investing a modest nest egg, or chasing yield in a supposedly curated hedge fund strategy.  

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