Wolper Law Firm, P.A. Investigates Centaurus Financial, Inc. Regarding The Sale Of Structured Notes, Steepener Notes and Variable Rate Certificates of Deposit (CDs)

Wolper Law Firm, P.A. announces that it is investigating brokerage firm Centaurus Financial, Inc. regarding its sales practices relating to structured notes, steepener notes, variable rate certificates of deposit (CDs) and other long-term, illiquid securities.    

Structured notes and steepener notes are complex investment products that pay variable interest that often times have long-term maturity dates.  If the investor chooses to sell the investment prior to maturity, they may be required to accept significant principal loss.  The liquidity features of structured products are often not understood by retail investors.  

Many Financial Advisors market structured notes and steepener notes as traditional fixed income securities.  In reality, many structured notes and steepener notes pay “teaser” interest rates in years one and two and, from years three until maturity, pay interest at a rate determined by a complex formula based on the relationship between multiple indices. 

In the current interest rate environment, investors who were sold structured notes or steepener notes within the last few years have likely experienced significant principal decline and, in some cases, adjustment of the interest rate to zero, resulting in a complete loss of income.  Many of these investments carry ten to fifteen-year maturities, which means that investors may be forced to hold non-income producing securities until maturity or sell them at a principal loss of 30%-50%. 

In a recent FINRA Arbitration filed by the Wolper Law Firm against Centaurus Financial, Inc., an elderly client was sold an over-concentrated portfolio of illiquid and unsuitable structured notes and steepener notes by Centaurus Financial Advisors, Ricky Mantei, Cindy Chiellini and Kathy Nishnic. Centaurus approved these sales and, accordingly, may be liable for the corresponding losses. 

The FINRA arbitration claim alleges:

“This case is about the sale of unsuitable and illiquid securities, including but not limited to, structured products, steepener notes, variable rate certificates of deposit, non-traded real estate investment trusts (“Non-Traded REITs”) and Unit Investment Trusts (“UITs”) to a seventy-five (75) year old retired blue-collar worker with impaired cognitive function.  The disputed investments were grossly unsuitable for Claimant, who was told he was purchasing “bonds” and “CDs” with a fixed rate of interest.  In reality, what Respondents sold him was an over-concentrated portfolio of long-term, adjustable rate structured products.  The income stream of these investments is dependent upon a complex formula calculated by the relationship between various indices and the Constant Maturity Swap rate (“CMS Rate”).  None of these complexities were ever explained to Claimant nor would they have ever been understood.

With the rise of interest rates over the last two years from historic lows, and the corresponding flattening of the yield curve, the interest rate has adjusted on Claimant’s investments and they now pay zero income.  Moreover, because they are long-term investments paying zero income, the principal value of these investments has precipitously declined.  Claimant is now faced with the prospect of holding non-income producing fixed income assets until maturity (2028-2036), which is likely beyond his life expectancy, or sell these investments at a steep loss.”

The sale of esoteric products, such as structured notes and steepener notes, is a growing trend in the securities industry, particularly among independent brokers, due to the high commissions.  These structured products generated commissions of approximately 3%. 

Separately, the Wolper Law Firm has also been retained by clients of Atul Makharia, another Financial Advisor in the same branch office as Ricky Mantei, Cindy Chiellini and Kathy Nishnic. The allegations against Atul Makharia involve the same investment products that are at the center of the investment dispute described above. The Wolper Law Firm is preparing to file additional claims based on these allegedly unsuitable sales.

What Should I Do If I Invested In Structured Notes Through Centaurus?

The sole purpose of this release is to investigate the sales practices of Centaurus Financial, Inc. in connection with the sale of structured notes and steepener notes.  Current and former clients of Centaurus Financial, Inc., who purchased structured notes that have information relating to the manner in which the firm represented these products, are encouraged to call the Wolper Law Firm at 800.931.8452 or contact us by email at mwolper@wolperlawfirm.com.  The Wolper Law Firm represents investors nationwide in securities litigation and arbitration.

Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities.  Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters.