Dion R. Padilla, of San Antonio, Texas, a stockbroker with Next Financial Group, Inc., was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that that Padilla engaged in willful securities fraud and effected an unauthorized annuity purchase. Department of Enforcement v. Padilla, No. 2014040362001 (June 9, 2016).
According to the Complaint, from April through May of 2013, Padilla knew or acted recklessly in the course of making material misrepresentations to a customer, RS, with respect to a variable annuity. The Complaint stated that RS was presented with the variable annuity investment opportunity by Padilla on April 19, 2013; however, RS was apparently told that the application was not for the purchase of an annuity. The Complaint stated that RS had made an initial investment of $220,787.00 accordingly.
Approximately 10 days later, Padilla persuaded RS not to surrender the annuity during a penalty-free surrender period via providing RS with assurances that the investment was not actually a variable annuity. Apparently, from April 19, 2013 through May 14, 2013, RS was persuaded by Padilla to invest $558,889.00 in additional funds into the aforementioned annuity, under another claim by Padilla that the funds were not being used for a variable annuity investment.
The Complaint alleged Padilla’s misrepresentations in this regard were misleading, false, and with the intent for RS to rely upon them. Specifically, Padilla allegedly knew or was reckless in not discovering that the investment sold to RS was a variable annuity. Customer RS reportedly relied not only on the initial misrepresentations from Padilla in making the annuity purchase, but also relied upon Padilla’s continued misrepresentations to make the additional investments. FINRA found that Padilla’s conduct in this regard was violative of Exchange Act Section 10(b), Rule 10b-5, and FINRA Rules 2010 and 2020.
FINRA’s Department of Enforcement also alleged that Padilla’s purchase of the variable annuity in the account of RS was not authorized. Particularly, although RS signed the application for the annuity to be purchased, FINRA claimed that Padilla was not authorized to facilitate the purchase due to his misrepresentations when the application by RS was signed, as well as misrepresentations concerning the investment during a free look period. FINRA also noted that RS undoubtedly informed Padilla that he did not intend on making the variable annuity purchase. FINRA found that Padilla’s conduct in this regard was violative of FINRA Rule 2010.
Public disclosure records reveal that Padilla has been subject to three customer disputes. On February 5, 2014, Padilla settled a customer dispute for $69,400.73 amid allegations of effecting an unauthorized trade. On April 25, 2016, Padilla became subject to a pending customer dispute, in which a customer is requesting $342,000.00 after alleging that Padilla did not include an insurance rider for lifetime principal protection as part of the customer’s variable annuity purchase.
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