Steven M. Netzel (also known as Steve M. Netzel), of Chandler, Arizona, a stockbroker registered with Kalos Capital Inc., has been fined $10,000.00 and suspended for four months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Netzel made unsuitable recommendations and caused the securities broker dealer to maintain false records or books. Letter of Acceptance, Waiver, and Consent No. 2018060897301 (April 14, 2023).
According to the AWC, Netzel submitted modified customer documents to Kalos Capital Inc. concerning the purchase of alternative investments, including GPB Capital. FINRA stated that Netzel provided investor profiles containing false information in relation to the alternative investment purchases of at least six customers. The documents displayed signs of alteration, such as whited-out portions and overwritten details, including inflated net worth and liquid net worth figures. By inflating the net worth, the customers’ percentage holdings in alternative investments were reduced, allowing Netzel to secure the necessary authorization for the purchases. Therefore, Netzel violated FINRA Rules 2010 and 4511.
The AWC also stated that Netzel made unsuitable investment recommendations to customers, resulting in the customers being excessively concentrated in alternative investments that were not appropriate for them based on their net worth, investment objectives, and risk tolerance.
For example, in October 2017, Netzel advised Customers A and B, retired seniors with a moderate risk tolerance and an objective of capital appreciation, to purchase two alternative investments. At the time, the couple already held $412,150.00 in alternative investments. Following the purchases, approximately 32 percent of their actual net worth was invested in alternative assets.
In another example, in October 2015, Customers D and E, a married couple who were retired seniors with a moderate risk tolerance and who sought capital appreciation, bought $138,000.00 in alternative investments. They already had alternative investments totaling 392,700.00 in value. This additional purchase increased the percentage of their net worth invested in alternative assets to approximately 35 percent. In February 2018, the couple made an additional $25,000.00 purchase, raising their total alternative investment holdings to $570,700.00. As a result, approximately 37 percent of their net worth was invested in alternative assets.
Additionally, between April and May 2017, Customer I, a 62-year-old retiree with a moderate risk tolerance and an objective of capital appreciation, made five purchases of GPB Capital, totaling $250,000.00. This increased their total alternative investment holdings to $513,315.00, constituting over 30 percent of their net worth. Therefore, Netzel violated FINRA Rules 2111 and 2010.
This is not the first time that Netzel has been the subject of a regulatory action concerning Netzel’s conduct in the securities industry. Public Disclosure shows that Netzel has been fined $10,000.00 by Arizona Securities Division because Netzel recommended unregistered securities and engaged in securities business without registration. Consent Order No. S-20840A-12-0084 (March 16, 2012). He violated A.R.S. 44-1841 and A.R.S. 44-1842.
FINRA Public Disclosure shows that Netzel is referenced in eight customer initiated investment related disputes concerning Netzel’s conduct while associated with securities broker dealers, including Kalos Capital Inc. On August 10, 2020, a customer initiated investment related FINRA securities arbitration claim involving Netzel’s conduct was settled for $75,000.00 in damages based upon allegations that Netzel breached a contract and breached his fiduciary duties in connection with the recommendation and sale of real estate investment trusts (REITs) and business development companies (BDCs). FINRA Arbitration No. 20-03543. According to the claim, the securities broker dealer failed to supervise him.
On January 18, 2021, a customer initiated investment related FINRA securities arbitration claim involving Netzel’s conduct was settled for $49,851.00 in damages based upon allegations that Netzel made misrepresentations of material fact and unsuitable recommendations of direct investments, oil and gas investments, and real estate securities. FINRA Arbitration No. 20-00610. The claim also alleges that Kalos Capital Inc. failed to supervise the stockbroker.
Netzel was also referenced in a customer initiated investment related complaint that was settled on March 22, 2022, for $15,000.00 in damages based upon allegations that Netzel made unsuitable recommendations, misrepresentations, and omissions, and that Kalos Capital Inc. failed to supervise his sales of direct investments and real estate securities.
On March 31, 2022, a customer initiated investment related FINRA securities arbitration claim involving Netzel’s conduct was settled for $91,083.40 in damages based upon allegations that Netzel made unsuitable recommendations, breached a contract, and breached his fiduciary duties in connection with the sale of direct investments, real estate securities, and business development companies. FINRA Arbitration No. 21-00478.
Netzel is also referenced in a customer initiated investment related FINRA securities arbitration claim that was settled for $26,869.99 in damages based upon allegations that Netzel made unsuitable recommendations and charged excessive commissions in connection with the sale of alternative investments. FINRA Arbitration No. 21-01775 (April 11, 2022). The claim alleges that the alternative investment recommendations were not consistent with the customer’s risk tolerance and investment objectives.
Netzel’s registration with Kalos Capital Inc. was terminated on June 19, 2019.
