Harmed Investor

In the Matter of Centaurus Financial, Inc., Ricky A Mantei, and Atul Makharia

Dec. 7, 2023

Admin. Proc. File No. 3-21295

On February 6, 2023, the Commission issued an Order Instituting Administrative and Cease-And-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities and Exchange Act of 1934, and Sections 203(e)(f) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-And-Desist Order (the “Order”)[1] against Centaurus Financial, Inc. (“CFI”), Ricky A. Mantei (“Mantei”), and Atul Makharia (“Makharia”), (collectively, the “Respondents”). In the Order, the Commission found that this matter arises out of the conduct of certain registered representatives and a supervisory principal associated with CFI, a California corporation with its principal place of business in Anaheim, California. Between June 2016 and July 2019 (the "Relevant Period"), Makharia and seven other registered representatives from CFI's Lexington, South Carolina branch office (collectively the "CFI RRs") recommended the sale of variable interest rate structured products (“VRSPs”) to ninety-four retail customers (“Specified Customers”) for whom such investments were unsuitable in light of each of the specific customers' financial situation and needs. The CFI RRs made these recommendations even though they knew, or reasonably should have, that the VRSP’s were unsuitable to these Specified Customers. By making these unsuitable recommendations of VRSPs to the Specified Customers, the Respondents violated Sections 17(a)(2) and 17(a)(3) of the Securities Act. CFI and Mantei also failed reasonably to supervise the CFI RRs. For his part, Mantei failed reasonably to follow CFI's then existing customer-specific suitability review procedures and review every proposed structured products transaction, including all VRSPs transactions. Additionally, June 2016 to July 2019, CFI failed to make and keep certain required records relating to certain customer accounts. During this period, CFI electronically recorded certain customer accounts information required under the Exchange Act Rule 17a-3(a)(17), including the customer’s name, tax identification numbers, date of birth, employment status, annual income, net worth, and investment objectives. In some instances, CFI, failed to maintain and preserve this information for at least six years and also failed to make and keep current record as required by Exchange Act.

The Respondents submitted Offers of Settlement (the “Offers”) which the Commission accepted. The Commission ordered CFI to pay disgorgement of $4,876, prejudgment interest of $623 and a civil money penalty of $750,000, Mantei to pay disgorgement of $92,650, prejudgment interest of $11,842 and a civil money penalty of $206,000 and Makharia to pay civil money penalty in the amount of $35,000, all in the total amount of $1,100,991.00. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, the Commission also created a Fair Fund for the disgorgement, prejudgment interest, and penalties (the “Fair Fund”) to be distributed to harmed investors.

The Fair Fund consists of the $1,100,991.00 paid by the Respondents. The Fair Fund has been deposited in a Commission-designated account at the U.S. Department of the Treasury. See the Commission’s Order: Release No. 33-11153

On March 11, 2024 the Commission issued an order appointing Miller Kaplan Arase LLP, as the Tax Administrator of the Fair Fund. See the Commission’s Order:  Release No. 34-99590

On April 16, 2024, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”).  The notice provides the public with 30 days to submit their comments on the Proposed Plan.  See the Commission’s Notice:  Release No. 34- 99966 and the Proposed Plan.

The Proposed Plan provides that the distribution of the Fair Fund shall be made to those certain investors who suffered losses based on the sales commissions and sales credits they paid in connection with purchasing Variable Interest Rate Structured Products from the Respondents between June 1, 2016 and July 31, 2019, inclusive.

On June 17, 2024 the Commission issued an order approving the Proposed Plan and simultaneously posted the approved plan of distribution (the “Plan”).  See the Commission’s Order:  Release No. 34-100360 and the Plan.

On November 5, 2024, the Commission issued an order appointing Simpluris Inc. (“Simpluris”), as the Fund Administrator to oversee the administration and distribution of the Fair Fund and, set the administrator’s bond amount. See the Commission’s Order: Release No 34-101512.

For more information please contact the Fund Administrator:
Email: info@centaurusfairfund.com
Telephone number: 1 (866) 675-2467
Website domain: www.centaurusfairfund.com

For more information, please contact the Commission:

Office of Distributions
Email: ENFOfficeofDistributions@sec.gov


[1] Securities Act of 1933 Rel. No. 11153, Securities Exchange Act of 1934 Rel. No. 96805, Investment Advisers Act of 1940 Rel. No. 6228

Last Reviewed or Updated: April 17, 2024