Abstract. In 1978 Cappell and Shaneson pointed out interesting properties of the Browder-Livesay invariants, which are analogous to the differentials of a certain spectral sequence. Such a spectral sequence was constructed by Hambleton and Kharshiladze in 1991. The main step of the construction of the spectral sequence consists in constructing an infinite filtration of spectra, in which, as is well known, only the first two spectra have a clear geometric meaning. In the present paper a geometric interpretation is given to all the spectra of the filtration in the Hambleton-Kharshiladze construction. Surgery obstruction groups for a system of embedded manifolds are introduced, and it is proved that the spectra realizing these groups coincide with the spectra in the Hambleton-Kharshiladze filtration. The algebraic and geometric properties of these groups and their connections with classical surgery theory are described. An isomorphism between these groups and the Browder-Quinn surgery obstruction groups for stratified manifolds is established. The results obtained are applied to the problem of realization of elements of the Wall groups by normal maps of closed manifolds and to the study of the iterated Browder-Livesay invariants.