NEXT Financial Group broker Dion Rey Padilla and FINRA's Department of Enforcement reached a settlement concerning allegations that Padilla effected an unauthorized variable annuity (VA) purchase while misrepresenting for at least nine months that the investment was not a VA when it, in fact, was.
OHO Disciplinary Proceeding #2014040362001
The findings indicate that not only did a customer stress to Padilla (CRD #4432230) that he did not want any of his funds invested in a variable annuity, Padilla actually wrote an e-mail in which he stated, "We are NOT investing any of your funds that were transferred over to our institution and for me to manage into a Variable Annuity—of any sort...we will be utilizing mutual funds and ETFs as your investment vehicles. Please be advised that we are NOT using or purchasing any sort of annuity 'type' product."
The document states that shortly after Padilla's customer retired from a 40+ year career and was looking to roll over a 401(k) into a non-VA product, Padilla specifically stated that the investment known as "Jackson National Life Perspective L Series Variable Annuity" was not a variable annuity, and instead was a type of management money investment.
Investigators said that due to Padilla's oral misrepresentations, the customer, upon signing documents to complete the Jackson National Life purchase, was unaware that it pertained to the purchase of a variable annuity.
When the customer received a confirmation letter from Jackson National Life Insurance congratulating him for his recent purchase of an "annuity product," he called Padilla to verify that the product was not a variable annuity, to which Padilla allegedly made the misrepresentation that the investment was not a VA, and sent another e-mail in which specifically stated, "We will not and have not invested your funds into a variable annuity product."
The findings indicate that had Padilla informed his customer that the investment was a VA, because of the product's Right to Examine provision, he would have been permitted to surrender the VA without incurring surrender charges or another penalty.
Instead, the findings state, the customer relied on Padilla's misrepresentations and contributed an additional $558,889 to the same VA, thus rolling over his entire 401(k) of $789,676 into a vehicle (VA) he previously stated he did not want to purchase.
As a result, the findings state, Padilla earned a net commission on the VA investments of $42,000, while the customer—when he finally found out that the product was indeed a variable annuity, as the result of a conversation not with Padilla, but with Jackson National Life Insurance itself—incurred surrender charges in excess of $60,000 when he withdrew from the VA.
A pending 2016 complaint in Padilla's BrokerCheck report alleges previous misconduct concerning a recommended VA investment, while a settled dispute from 2014 alleged that Padilla executed an unauthorized trade.
If you have invested with NEXT Financial Group's Dion Rey Padilla or with any broker or financial adviser whose misrepresentations or omissions of material facts concerning the type of investment being sold—such as selling you a VA or other product while falsely identifying or concealing the true nature of the product—has proven harmful to your investments or interests due to high fees, surrender charges, or poor performance due to unsuitability, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.