Dion R. Padilla, of San Antonio, Texas, a stockbroker with Next Financial Group, Inc., was fined $10,000.00 and suspended for fifteen months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon an Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings that Padilla made an unauthorized variable annuity transaction and misrepresented an annuity to a customer. Department of Enforcement v. Padilla, No. 2014040362001(Feb. 7, 2017).
According to the Order, between 2011 and 2013, Padilla consulted with customer RS concerning RS’s investment objectives, and contemplated a $780,000.00 rollover from RS’s 401(k). The Order stated that in the course of Padilla’s consultations with RS, the customer rejected Padilla’s recommendation to buy a variable annuity. Notwithstanding, in April 19, 2013, RS reportedly completed and submitted documentation to buy a National Life Perspective L Series Variable Annuity issued by Jackson National, in which he contributed $220,787.00 for the purchase. Padilla evidently informed RS that the investment was not an annuity; but rather, a managed money investment.
The Order stated that RS did not know that he had purchased a variable annuity until he was provided a confirmation for purchase from Jackson National. After RS reached out to Padilla to question the transaction, Padilla apparently informed RS that his funds had not been invested in a variable annuity. The Order revealed that RS relied upon the representations made by Padilla, and made another contribution of $558,889.00 in the investment, which consisted of the remainder of assets which RS held in his 401(k). Padilla reportedly earned $42,000.00 in commissions as a result.
According to the Order, Padilla denied to RS that RS’s additional contributions were made in a variable annuity, even after RS received another confirmation from Jackson National. Evidently, on January 2, 2014, Padilla acknowledged to RS that his monies had been invested in the annuity; however, he tried to get RS to hold the investment. RS reportedly rejected Padilla’s suggestion, at which point Padilla told RS that he would have to pay a surrender penalty of $62,000.00 in order to cancel. The customer reportedly pursued the surrender of the annuity and incurred the penalty.
FINRA ultimately found that Padilla made misrepresentations to RS based upon his false statements that RS’s monies had not been invested in a variable annuity. Additionally, despite RS signing the forms to purchase a variable annuity, it was considered by FINRA to have been unauthorized by the customer based upon Padilla’s misrepresentations. FINRA found that Padilla’s conduct in this regard was violative of FINRA Rule 2010.
FINRA Public Disclosure reveals that Padilla has been identified in two customer initiated investment related disputes containing allegations of Padilla’s misconduct while employed with Next Financial Group. Specifically, on February 5, 2014, a customer initiated investment related complaint involving Padilla’s conduct was settled for $69,400.73 in damages based upon allegations that Padilla effected an unauthorized variable annuity transaction.
Subsequently, on August 8, 2016, a customer filed an investment related arbitration claim involving Padilla’s conduct, in which the customer requested $342,000.00 in damages based upon allegations that Padilla failed to attach an insurance rider on the customer’s variable annuity policy designed to provide principal protection for the customer’s life.
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