Initiated By
FINRA
Allegations
DIAZ WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT HE DID NOT HAVE A REASONABLE BASIS FOR RECOMMENDING THAT CUSTOMERS MAKE VARIABLE ANNUITY EXCHANGES. THE COMPLAINT ALLEGES THAT DIAZ FAILED TO MAKE AN INDIVIDUALIZED ASSESSMENT OF THE ADVANTAGES AND DISADVANTAGES OF THE RECOMMENDED EXCHANGES AND FAILED TO UNDERSTAND THE FEATURES OF THE VARIABLE ANNUITY PRODUCT. THE COMPLAINT ALSO ALLEGES THAT DIAZ FALSIFIED OR CAUSED THE FALSIFICATION OF THE REPORTED NET WORTH OF CUSTOMERS IN ORDER TO MAKE IT APPEAR THAT THEY SATISFIED THE MINIMUM NET WORTH REQUIREMENTS FOR CERTAIN ALTERNATIVE INVESTMENTS OR THE PROHIBITIONS AGAINST INVESTING MORE THAN 10 PERCENT OF A CUSTOMER'S ASSETS INTO A SINGLE ILLIQUID PRODUCT. DIAZ MISLED OR ATTEMPTED TO MISLEAD HIS MEMBER FIRMS AND THE ALTERNATIVE INVESTMENT PRODUCT ISSUERS TO BELIEVE THAT THESE CUSTOMERS WERE ELIGIBLE TO PURCHASES THE INVESTMENTS UNDER THE TERMS ESTABLISHED, WHEN IN FACT THEY WERE NOT. DIAZ ATTEMPTED TO INDUCE AN INSURANCE COMPANY TO TRANSFER A CUSTOMER'S VARIABLE ANNUITY TO HIS CONTROL BY ALTERING OR CAUSING THE ALTERATION OF THE SIGNATURE DATE ON A TRANSFER AUTHORIZATION FORM. THE COMPLAINT FURTHER ALLEGES THAT DIAZ INTENTIONALLY OR RECKLESSLY MADE UNTRUE STATEMENTS OF MATERIAL FACT BY FALSELY TELLING FIVE CUSTOMERS THAT ONE OR MORE OF THE ALTERNATIVE INVESTMENTS WERE GUARANTEED TO PAY A SPECIFIC RATE OF RETURN AND TELLING TWO CUSTOMERS THAT THE INVESTMENTS WERE GUARANTEED. THIS CONDUCT VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER, NASD RULE 2120 AND FINRA RULE 2020. IN ADDITION, THE COMPLAINT ALLEGES THAT DIAZ FALSIFIED HIS FIRM'S BOOKS AND RECORDS BY CREATING VARIABLE ANNUITY SWITCH FORMS WITH FALSE REASONS FOR THE EXCHANGES. DIAZ FALSIFIED OR CAUSED THE USE OF FALSIFICATION OF NET WORTH, INCOME, ASSETS, AND/OR RISK TOLERANCE INFORMATION FOR NINE CUSTOMERS, AND FORGED THE SIGNATURE OF ONE CUSTOMER. MOREOVER, THE COMPLAINT ALLEGES THAT DIAZ MADE UNAUTHORIZED TRADES IN THE ACCOUNTS OF CUSTOMERS. FURTHERMORE, THE COMPLAINT ALLEGES THAT DIAZ, FIRED FROM FOUR FIRMS, ROUTINELY ENGAGED IN EFFORTS TO MISLEAD HIS CUSTOMERS INTO BELIEVING THAT HE HAD LEFT FIRMS VOLUNTARILY, BOTH THROUGH AFFIRMATIVE STATEMENTS AND THROUGH HIS RESPONSE TO QUESTIONS ABOUT THE CIRCUMSTANCES UNDER WHICH HE LEFT THE FIRMS.
Resolution
Decision & Order of Offer of Settlement
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Start Date
5/27/2015
Regulator Statement
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, DIAZ CONSENTED TO THE SANCTION AND TO THE ENTRY OF FINDINGS THAT HE INDUCED SEVERAL CUSTOMERS TO ENTER INTO VARIABLE ANNUITY EXCHANGES, OFTEN SUBJECT TO SIGNIFICANT SURRENDER CHARGES, WITHOUT A REASONABLE BASIS FOR RECOMMENDING THOSE EXCHANGES. DIAZ DID NOT CONDUCT ANY QUANTITATIVE ANALYSIS OF THE FINANCIAL BENEFIT OR DETRIMENT OF THE EXCHANGES TO HIS CUSTOMERS. DIAZ FAILED TO MAKE AN INDIVIDUALIZED ASSESSMENT OF THE ADVANTAGES AND DISADVANTAGES OF THE RECOMMENDED EXCHANGES, AND ALSO FAILED TO UNDERSTAND THE FEATURES OF THE VARIABLE ANNUITY PRODUCT. THE FINDINGS STATED THAT DIAZ FALSIFIED OR CAUSED THE FALSIFICATION OF THE REPORTED NET WORTH OF CUSTOMERS IN ORDER TO MAKE IT APPEAR THAT THEY SATISFIED THE MINIMUM NET WORTH REQUIREMENTS FOR CERTAIN ALTERNATIVE INVESTMENTS OR ISSUER- AND STATE-IMPOSED PROHIBITIONS AGAINST INVESTING MORE THAN 10 PERCENT OF A CUSTOMER'S ASSETS INTO A SINGLE ILLIQUID PRODUCT. DIAZ MISLED OR ATTEMPTED TO MISLEAD HIS MEMBER FIRMS AND THE ISSUERS OF THE PRODUCTS INTO ALLOWING THESE CUSTOMERS TO PURCHASE INVESTMENTS FOR WHICH THEY WERE INELIGIBLE UNDER THE TERMS ESTABLISHED BY THE ISSUERS AND BY THE STATE OF PENNSYLVANIA, IN WHICH ALL OF THE CUSTOMERS RESIDE. IN ADDITION, DIAZ ATTEMPTED TO INDUCE AN INSURANCE COMPANY TO TRANSFER A CUSTOMER'S VARIABLE ANNUITY TO HIS CONTROL BY ALTERING OR CAUSING THE ALTERATION OF THE SIGNATURE DATE ON A TRANSFER AUTHORIZATION FORM. THE FINDINGS ALSO STATED THAT DIAZ INTENTIONALLY OR RECKLESSLY MADE UNTRUE STATEMENTS OF MATERIAL FACT BY FALSELY TELLING FIVE CUSTOMERS THAT ONE OR MORE OF THE ALTERNATIVE INVESTMENTS WERE GUARANTEED TO PAY A SPECIFIC RATE OF RETURN, AND BY TELLING TWO CUSTOMERS THAT THE INVESTMENTS WERE GUARANTEED. THIS CONDUCT VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER, NASD RULE 2120 AND FINRA RULE 2020. THE FINDINGS ALSO INCLUDED THAT DIAZ FALSIFIED HIS MEMBER FIRM'S BOOKS AND RECORDS BY CREATING VARIABLE ANNUITY SWITCH FORMS WITH FALSE REASONS FOR THE EXCHANGES. DIAZ FALSIFIED OR CAUSED THE USE OF FALSIFICATION OF NET WORTH, INCOME, ASSETS AND/OR RISK TOLERANCE INFORMATION FOR NINE CUSTOMERS, AND ALTERED OR CAUSED THE ALTERATION OF THE DATE A CUSTOMER SIGNED A TRANSFER AUTHORIZATION. DIAZ OR SOMEONE WORKING AT HIS DIRECTION CREATED A FIRM'S SECURITIES INVESTOR PROFILE QUESTIONNAIRE FOR A CUSTOMER WITHOUT HER PARTICIPATION, FORGED HER SIGNATURE ON THE DOCUMENT AND WRONGLY DATED IT. FINRA FOUND THAT DIAZ MADE UNAUTHORIZED TRADES IN CUSTOMERS' ACCOUNTS. FINRA ALSO FOUND THAT DIAZ, FIRED FROM FOUR FIRMS, ROUTINELY ENGAGED IN EFFORTS TO MISLEAD HIS CUSTOMERS INTO BELIEVING THAT HE HAD LEFT THOSE FIRMS VOLUNTARILY, BOTH THROUGH AFFIRMATIVE STATEMENTS AND THROUGH HIS RESPONSES TO QUESTIONS ABOUT THE CIRCUMSTANCES UNDER WHICH HE LEFT THE FIRMS.
Broker Comment
MR. DIAZ VEHEMENTLY DENIES THE ALLEGATIONS IN THE COMPLAINT AND INTENDS TO VIGOROUSLY DEFEND HIMSELF IN THIS PROCEEDING.
