Erez Law, an investment fraud law firm, represents investors nationwide that were sold certain structured products referred to as “steepeners” which are either notes or CDs that pay varying levels of interest depending on the steepness of flatness of the yield curve. When the yield curve flattened in 2018 and long term interest rates were equal to short term interest rates, these steepeners rapidly declined in value and either ceased paying interest or paid significantly lower interest. In 2019, the yield curve inverted and short term interest rates rose to a higher level than long term interest rates causing yet more losses. The negative impact on investors owning steepeners has been dramatic.
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.
Steepeners are generally long term, illiquid debt. They also generally pay quarterly interest, if any, equal to a multiple of the difference between two interest rates less a spread. Steepeners are 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.
Steepeners sold to many retail investors generally amount 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 steepener would cease paying the same level of interest or any interest and their value would decline. Many of the steepeners paid an attractive teaser interest rate for one or two years with no guarantee of additional interest payments.
The steepeners sold to retail investors by brokerage firms nationwide generally have long maturities, such as 20 years. Given that the securities are not listed on an exchange and are therefore highly illiquid, investors would have to sell the steepeners at significant discounts if they sold prior to maturity.
Erez Law has been retained by investors across the United States who report being misled by their brokers or financial advisors when they were told that the “notes” or “CDs” were high quality fixed-income investments. In reality, 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, brokers represented to their clients that the steepeners they solicited and sold to them paid an attractive “yield.” Brokers cited the high credit rating of the issuer in order to induce clients to invest, and some 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.
Furthermore, many brokers employed a strategy of concentrating their customers in these structured products
Investors seeking recourse for losses in steepeners are required to file their disputes in FINRA arbitration. Erez Law has been retained by many investors to file FINRA arbitration claims against brokerage firms to recover their losses. Our firm has been very successful in making recoveries for our clients throughout the United States for investment losses and has recovered over $150 million for investors.
At Erez Law, many of our clients come to us because of our specialization in recovering investment losses from brokerage firms. We use considerable legal resources to help investors who trusted reckless and unethical financial advisors. We have filed many FINRA arbitration cases against brokerage firms, seeking to hold these firms accountable for dishonest investment advisory practices, unsuitable recommendations, misrepresentation, and over-concentration in connection with investments losses.
If your broker sold you steepeners without understanding the risks associated with your investment, you may be able to recoup your losses. Our team of securities attorneys have experience with FINRA arbitration, and we know how to hold brokerage firms and advisers liable for their indiscretions. Contact us at (888) 840-1571 for a free consultation.
Recovering Losses Through FINRA Arbitration
Investors in the United States are filing FINRA arbitration claims against brokerage firms for unsuitable structured products recommendations from their brokers. Many of these investors were not adequately warned about the high risk nature of the investments, and have suffered serious losses as a result. Investors may have a claim against the brokerage firm based on misrepresentation, unsuitability, breach of fiduciary duty, and state and federal securities laws.
A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a financial advisor recommends a security, the financial advisor must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for the customer. The suitability of an investment for a particular individual is at the center of the investment process and one of the key duties owed by a broker to the customer. A firm may be held liable for its broker’s failure to recommend suitable investments to its customers.
In addition, 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, the brokerage firm may be liable for investment or other losses suffered by financial advisors who worked for the firm.
Erez Law Cases for Steepeners/Structured Products Losses
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 a family who suffered significant losses to their irreplaceable retirement savings due to recommendations by Ricky Mantei (CRD# 1098981) and Cindy Chiellini (CRD# 1015592) in unsuitable structured notes. According to the claim filed by Erez Law, Mantei and Chiellini allegedly failed to adequately disclose the acute risks attendant to the structured products they sold to the client. The clients suffered significant losses due to over-concentrated investments in complex, high risk, illiquid and unsuitable structured products, and structured CDs by making egregious misrepresentations and omissions.
In May 2019, Erez Law filed another FINRA arbitration against Centaurus Financial, Inc. related to investments with Mantei, Chiellini, Katherine Nishnic (CRD# 2499553), and Dana Matthew Hawkins (CRD# 5731136). Erez Law has alleged that they recklessly recommended that their client over-concentrate her accounts in complex, high risk, illiquid, and unsuitable structured products. It is alleged that the brokers referred to the investments as “bonds,” which in fact they were not. Unbeknownst to the client, the so-called bonds that Mantei, Chiellini, Nishnic, and Hawkins sold her 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.
In May 2019, Erez Law filed another FINRA arbitration against Centaurus Financial, Inc. and J.P. Turner & Company, LLC on behalf of a family who suffered investment losses due to over-concentration in complex, high risk, and illiquid investments including unsuitable structured products and structured CDs.
Mantei has been registered with Centaurus Financial, Inc. in Lexington, South Carolina since May 2015, and was previously registered with J.P. Turner & Company, L.L.C. in Lexington, South Carolina from 2010 to 2015. Mantei has been the subject of 12 customer complaints between 1995 and 2019. Chiellini has been registered with Centaurus Financial, Inc. in Lexington, South Carolina since May 2015. Chiellini has been the subject of 18 customer complaints between 2016 and 2019.
Clients Were Sold Unsuitable Steepeners/Structured Products
Erez Law represents investors in claims against brokerage firms including Centaurus Financial, Inc, J.P. Turner & Company, LLC, Aegis Capital Corp., Wells Fargo Advisors, and other brokerage firms for structured products investment losses. Many investors trusted their investments to their brokers only to lose all or most of their assets due to unsuitable and over-concentrated structured products.
Erez Law is currently investigating the following brokers who have allegedly recommended unsuitable structured products:
- Ricky Mantei (CRD# 1098981)
- Cindy Chiellini (CRD# 1015592)
- Katherine Nishnic (CRD# 2499553)
- Dana Matthew Hawkins (CRD# 5731136)
- Alan Applebaum (CRD# 500336)
- Joseph Andreoli (CRD#1718688)
Unsuitable Steepeners/Structured Products Investment Losses
Erez Law represents investors that invested in the following types of structured products, including but not limited to the following:
- Structured CDs
- Market-Linked CDs
- Leverage Callable CMS Curve Linked Notes
- Callable Quarterly CMS Spread-Linked Notes
- Callable Variable Rate Range Accrual CDs
- Callable Interest Rate Spread CDs
- Senior Callable CMS Steepener Notes
- Callable CMS Spread Notes
Contact Us for a Free Consultation
If you have experienced investment losses or financial irregularities as a result of investmenting in steepeners/structured products, Erez Law is here to help. We are not afraid of taking on brokerage firms, and we can and will combat some of the largest brokerage firms in the United States. Count on our experience to successfully take you through the FINRA arbitration process.
Please call us at (888) 840-1571 for a free consultation, or complete our contact form to investigate your recourse for losses due to investments in steepeners/structured products. Erez Law is a nationally-recognized law firm representing individuals, trusts, corporations, and institutions in claims against brokerage firms, banks and insurance companies. If you have more questions about investment fraud, you can visit our securities fraud frequently asked questions page, or contact our firm to speak with one of our qualified fraud attorneys.