Kim Ray Kunz, of Atascadero, California, a stockbroker registered with Westpark Capital Inc., has been fined $7,500.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Kunz made the unsuitable investment recommendation of “high-risk investment products” to customers during the time that Kunz was associated with Westpark Capital Inc. Letter of Acceptance, Waiver, and Consent No. 2021070498103.
The regulator sanctioned Kunz for his recommendations of GWG Holdings Inc. Class L Bonds. GWG Holdings was involved in the secondary life insurance market, purchasing life insurance policies and paying the premiums until the policies matured. To finance its operations, GWG Holdings offered Class L Bonds to investors. Those bonds were risky and suitable only for people that could afford to lose their investment. Kunz recommended these bonds to customers whose financial profiles and risk tolerances did not match the characteristics of the GWG Holdings Class L Bonds.
For example, FINRA stated that in November 2019, Kunz recommended that Customer A invest $47,000.00 in GWG Holdings Class L Bonds. This customer’s investment objectives were focused on income and growth without high-risk investments. However, as a result of Kunz’s recommendations, more than 65 percent of Customer A’s liquid net worth was used for alternative investments, including theGWG Holdings Class L Bonds.
Similarly, in March 2020, Kunz recommended that Customer B, who had a moderate risk tolerance, invest $50,000.00 in L Bonds from GWG’s third offering. Kunz later recommended the $147,000.00 investment in GWG Holdings Class L Bonds in February 2021, this time from GWG’s fourth offering. These recommendations led to over 30 percent of Customer B’s liquid net worth being invested in the high-risk, illiquid GWG Holdings Class L Bonds.
FINRA determined that Kunz violated FINRA Rule 2111, which requires brokers to have a reasonable basis for believing that a recommended transaction or investment strategy is suitable for the customer based on their investment profile. In addition, Kunz violated Securities Exchange Act of 1934 Regulation Best Interest, which requires stockbrokers to act in the best interest of customers when making recommendations.
Public Disclosure shows that Kunz is referenced in two customer initiated investment related disputes concerning Kunz’s conduct while associated with securities broker dealers. On August 29, 2023, a customer initiated investment related FINRA securities arbitration claim involving Kunz’s conduct was settled for $100,000.00 in damages based upon alleged omission of material facts and unsuitable investment recommendations of GWG Holdings Class L Bonds when Kunz was associated with Westpark Capital Inc. FINRA Arbitration No. 22-01748.
On February 24, 2023, a customer filed an investment related FINRA securities arbitration claim involving Kunz’s conduct in which the customer requested $106,000.00 in damages based upon alleged unsuitable trading and overconcentration in GWG Holdings Class L Bonds when Kunz was associated with Westpark Capital Inc. FINRA Arbitration No. 23-00479.
Kunz has been associated with Westpark Capital Inc. in Atascadero, California since November 13, 2017.
