Erez Law Files $1 Million-Plus Claim for investment Losses by Centaurus Financial, Inc. and J.P. Turner & Company, LLC Financial Advisors Ricky Mantei and Cindy Chiellini

Posted on Tuesday, April 23rd, 2019 at 3:45 pm    

South Carolina

Erez Law recently 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.

The customers were clients of Ricky Mantei (CRD# 1098981) and Cindy Chiellini (CRD# 1015592), who were registered representatives of Centaurus Financial, Inc. in Lexington, South Carolina.

Erez Law alleges that the couple entrusted Mantei and Chiellini with virtually all of their securities investments, which represented most of their liquid assets including retirement savings.

According to the filed claim, the husband explained to the financial advisors that he was nearing his intended retirement and he was in no position to jeopardize his irreplaceable retirement savings. The husband also explained to Mantei and Chiellini that he was risk averse and primarily interested in secure fixed investments that would preserve his capital and generate and stable degree of consistent income.

The wife also entrusted Mantei and Chiellini with all of her securities investments, which represented the vast majority of her liquid assets as well as the majority of her net worth. She also informed the financial advisors that she was not interested in high risk or aggressive investments or strategies, but she was interested in having an allocation to secure fixed investments that would preserve her capital and generate and stable degree of consistent income. The wife also created an account to generate income for her adult children, and she intended to preserve the capital that funded the account.

The wife’s adult daughter also opened an account with Mantei and Chiellini. She was also an inexperienced investor and was not interested in high risk or aggressive investments or strategies.

It is alleged that Mantei and Chiellini recklessly mismanaged the family’s accounts and caused them massive and unacceptable losses. Mantei and Chiellini recklessly recommended that the family over-concentrate their accounts in complex, high risk, illiquid and unsuitable structured products and structured CDs by making egregious misrepresentations and omissions.

Erez Law also alleges that Mantei and Chiellini misled the clients that the structured products were were high quality fixed income investments. Sadly, the investments 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.

Additionally, Mantei and Chiellini represented to the clients that the structured products they solicited and sold to them paid an attractive “yield.” Mantei and Chiellini regularly cited to the high credit rating of the issuer in order to induce the clients to invest, and they touted the supposed safety and the so-called yield as the central selling points without fully and adequately disclosing the key features and risks attendant to the structured products they were recommending.

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 approve clients for structured products.

The structured products Mantei and Chiellini sold to the clients 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.

The structured products sold to the family by Mantei and Chiellini generally amounted to an opaque and complex wager on the yield curve. The yield curve is a curve showing interest rates at different lengths of time. Generally, if the yield curve flattened and the difference between two points on the yield curve did not exceed a certain threshold, the Structured Products sold to the family would cease paying the same level of interest or any interest and their value would decline. 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. Mantei and Chiellini failed to adequately disclose the acute risks attendant to the Structured Products they sold to the clients.

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

Mantei and Chiellini further compounded the risks to which the the family was unknowingly exposed by over-concentrating their accounts in structured products. This strategy only served to further increase the risks to the family’s accounts.

Some accounts were more than 80% concentrated in structured products. The drastic levels of concentration recommended by Mantei and Chiellini resulted in an unsuitable investment strategy. Mantei and Chiellini implemented their unsuitable structured products investment strategy while at J.P. Turner and continued to recommend the unsuitable strategy once they transferred to Centaurus Financial in May 2015 through the closure of the client’s accounts.

Mantei and Chiellini recommended the family continue to hold the structured products as part of their investment strategy. However, this strategy was not unique to the family’s accounts. Mantei and Chiellini’s strategy of concentrating customers in 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 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 11 customer complaints between 2016 and 2019, one of which was closed without action, according to her CRD report:

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.

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.