Erez Law Continues to File Cases for Investors Burned by Ricky Mantei, Cindy Chiellini and Centaurus Financial, Inc.

Posted on Tuesday, May 14th, 2019 at 2:57 pm    

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In May 2019, Erez Law filed another FINRA arbitration against Centaurus Financial, Inc. related to investments with Ricky Mantei (CRD# 1098981), Cindy Chiellini (CRD# 1015592) and Katherine Nishnic (CRD# 2499553), who were registered representatives of Centaurus Financial, Inc. in Lexington, South Carolina.

According to the claim filed by Erez Law, the clients are a married couple of advanced age and their adult daughter. The retired couple opened a brokerage account with Nishnic in 2015. They informed Nishnic that they were humble people that live a low-key lifestyle. They also informed Nishnic that they were risk-averse and interested in generating a modest and sustainable amount of income from their investments while preserving their retirement savings. The couple’s adult daughter, who was divorced, informed Nichnic that she was an unsophisticated and inexperienced investor who had never had a brokerage account before, and she was not interested in high risk or speculative investments and did not need any income to meet her expenses.

The family entrusted Mantei, Chiellini and Nishnic with all of their securities investments which represented their irreplaceable retirement savings. The family’s accounts were originally with J.P. Turner and then Centaurus when Mantei, Chiellini and Nishnic transferred to the firm in June 2015.

It is alleged that Mantei, Chiellini and Nishnic recklessly recommended that the family over-concentrate their accounts in complex, high risk, and illiquid investments including unsuitable structured products and structured CDs by making egregious misrepresentations and omissions. It is also alleged that Mantei, Chiellini and Nishnic misled the family by representing that the Structured Products were high quality fixed-income investments.

Mantei, Chiellini and Nishnic represented to the family that the Structured Products they solicited and sold to them paid an attractive “yield”. The Structured Products carried names that included the words “CDs” and “Notes” which connote safety. Mantei, Chiellini and Nishnic failed to fully and adequately disclose the key features and risks attendant to the Structured Products they were recommending. In fact, unbeknownst to the family, the so-called CDs and notes that Mantei, Chiellini and Nishnic sold them were complex Structured Products, often with short-term teaser interest rates, long-dated maturities and obscure features that caused them to lose capital rapidly along with greatly diminished interest payments.

Structured products are complex securities derived from or based on a single security or index, basket of securities or indices, a debt issuance, a commodity and/or a foreign currency. Most Structured products pay an interest or coupon rate based on certain defined parameters. Structured Products typically consist of a note and a derivative, most often an option. While the note pays interest, the derivative defines the payment at maturity. Despite the fact that structured products most often involve options, they are typically marketed as debt securities. Structured products can offer a form of principal protection and frequently cap the upside participation in the underlying investment. Additionally, structured products do not trade on an exchange and are generally not liquid investments. Structured products are issued by brokerage firms and are registered with the SEC. Structured CDs are issued by banks and are not registered with the SEC. Given the complexity of these structured products and their similarities to options, securities regulators have required brokerage firms such as J.P. Turner & Company, LLC, and. Centaurus Financial, Inc. to specially-approved clients for structured products.

The Structured Products Mantei, Chiellini and Nishnic sold to the family were generally long term, illiquid debt that paid quarterly interest, if any, equal to a multiple of the difference between two interest rates less a spread. The Structured Products were generally callable at par plus accrued interest for part of a quarter, typically after just one year. Since the issuers would call the notes unless the interest, they were likely to pay were below market rates, investors were virtually certain to not be compensated for the risk of these Structured Products. Additionally, many of the Structured Products paid an attractive teaser interest rate for one or two years with no guarantee of additional interest payments.

The Structured Products generally had long maturities such as 20 years. Given that the securities are not listed on an exchange and therefore highly illiquid, investors such as the family would have to sell the Structured Products at significant discounts if they sold prior to maturity. Many of the Structured Products were set to mature in 2034, 2035, or 2036. The husband would have to live to 100 to see the maturity of some of his investments sold to him by Mantei, Chiellini and Nishnic.

Erez Law alleges that Mantei, Chiellini and Nishnic failed to adequately disclose the acute risks attendant to the Structured Products they sold to the family. Mantei, Chiellini and Nishnic further compounded the risks to which the husband was unknowingly exposed by over-concentrating his IRA account in Structured Products. This strategy only served to further increase the risks in the husband’s account. The drastic level of concentration recommended by Mantei, Chiellini and Nishnic for the husband’s IRA resulted in an unsuitable investment strategy. The family sustained staggering losses in the Structured Products that Mantei, Chiellini and Nishnic sold them.

Mantei, Chiellini and Nishnic’s strategy of selling Structured Products may be explained by the high level of commissions it is believed they earned in connection with selling Structured Products. It is believed that they in fact charged over 3% in commission on the Structured Products sold to their customers, which is a rich commission and significantly higher than other suitable investments including traditional fixed-income investments.

Mantei, Chiellini and Nishnic also sold the family additional high risk and unsuitable non-traded real estate investment trusts (REITs) in Hospitality Investors Trust and Northstar Healthcare Income, two non-traded REITs. Both of these are non-listed and illiquid investments. These investments have declined in value, can only be sold at a significant discount or loss and the yield has declined as well. Mantei, Chiellini and Nishnic failed to adequately disclose the risks attendant to these investments.

Non-traded REITs typically pay high commissions and usually are the motivating reason for financial advisors such as Mantei, Chiellini and Nishnic to sell these types of disadvantaged investments.

Mantei, Chiellini and Nishnic also recommended additional high risk and unsuitable securities and strategies, including investments in Global Net Lease.

Regrettably, this claim against Mantei, Chiellini and Nishnic for reckless misconduct in connection with the sale of Structured Products and illiquid investments is not unique or isolated. Mantei, Chiellini and Nishnic currently have multiple pending customer complaints of a similar nature alleging misrepresentations, omissions, and unsuitability in regards to Structured Products and other illiquid investments.

In April 2019, Erez Law filed a $1 million-plus FINRA arbitration against Centaurus Financial, Inc. and J.P. Turner & Company, LLC for losses on behalf of an elderly married couple and grown children who suffered significant losses in their investment accounts due to recommendations of unsuitable structured notes.

It is alleged that Mantei, Chiellini and Nishnic recommended various types of structured products, including but not limited to the following:

Mantei has been registered with Centaurus Financial, Inc. in Lexington, South Carolina since May 2015 and previously with J.P. Turner & Company, L.L.C. in Lexington, South Carolina from 2010 to 2015. Mantei has been the subject of eight customer complaints between 1995 and 2019, according to his CRD report. Recent complaints are regarding:

November 2018. “Customer primarily alleges that the financial advisor recommended unsuitable investments and several other allegations associated therewith.” The customer is seeking $100,000 in this pending customer complaint.

October 2018. “The customer allege that their investments were unsuitable based on their investment objectives.” The customer is seeking $233,238 in this pending customer complaint.

May 2018. “The Claimants, beneficiaries of a deceased client’s account, allege that the Registered Representative recommended the client unsuitable investments, which later resulted in partial loss of value upon liquidation attempt.” The customers are seeking $100,000 in damages and the case is currently pending.

December 2016. “Claimants state that they were sold unsuitable investments from 2010 through 2016.” The customer sought $164,000 and the case was settled for $70,000.

Chiellini has been registered with Centaurus Financial, Inc. in Lexington, South Carolina since May 2015. Chiellini has been the subject of 12 customer complaints between 2016 and 2019, one of which was closed without action, according to her CRD report:

March 2019. “Customer primarily alleges that, on or around July 30, 2018, the financial advisor processed unauthorized trades and several other allegations associated therewith.” The customer is seeking $90,000 in this pending customer complaint.

February 2019. “Customer primarily alleges that the financial advisor recommended unsuitable investments and several other allegations associated therewith from late 2013 to early 2019.” The customer is seeking $253,757 in this pending customer complaint.

January 2019. “Customer primarily alleges that the financial advisor recommended unsuitable investments and several other allegations associated therewith from late spring/summer of 2014 through summer of 2018.” The customer is seeking $500,000 in this pending customer complaint.

December 2018. “Customer primarily alleges that the financial advisor recommended unsuitable investments and several other allegations associated therewith from November 30, 2012 through August 30, 2018.” The customer is seeking $336,160 in this pending customer complaint.

November 2018. “Customer primarily alleges that the financial advisor recommended unsuitable investments and several other allegations associated therewith.” The customer is seeking $100,000 in this pending customer complaint.

November 2018. “Customers primarily allege that the financial advisor recommended unsuitable investments and several other allegations associated therewith.” The case is currently pending.

September 2018. “Customers allege their investments were inappropriate and unsuitable based on their investment objectives.” The customer is seeking $150,000 in this pending customer complaint.

September 2018. “The customer allege that their investments were unsuitable based on their investment objectives.” The customer is seeking $18,000 in this pending customer complaint.

August 2018. “Clients allege that the investments in their account(s) had less liquidity than they originally instructed the Registered Representative they desired, resulting in a loss of principal upon sale.” The customer is seeking $175,000 in this pending customer complaint.

May 2018. “The Claimants, beneficiaries of a deceased client’s account, allege that the Registered Representative recommended the client unsuitable investments, which later resulted in partial loss of value upon liquidation attempt.” The customers are seeking $100,000 in damages and the case is currently pending.

December 2016. “Claimants state that they were sold unsuitable investments from 2010 through 2016.” The customer sought $164,000 and the case was settled for $70,000.

Nishnic has been registered with Centaurus Financial, Inc. in Lexington, South Carolina since May 2015. Nishnic has been the subject of three customer complaints between 2017 and 2018, one of which was closed without action, according to her CRD report:

November 2018. “Customer primarily alleges that the financial advisor recommended unsuitable investments and several other allegations associated therewith.” The customer is seeking $100,000 in damages and the case is currently pending.

August 2018. “Client alleges that the products in which she and her husband invested while the Registered Representative was at another broker/dealer were unsuitable.” The customer is seeking $95,000 in damages and the case is currently pending.

April 2017. “Client claims the two REITs he purchased were unsuitable.” The customer is seeking $8,604.03 in damages and the case is currently pending.

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Centaurus Financial may be liable for investment or other losses suffered by Mantei and Chiellini’s customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.