Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Kim Kunz (Kunz), previously associated with Westpark Capital, Inc., has at least one disclosable event. These events include one regulatory event, alleging that Kunz recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on August 05, 2024.
Without admitting or denying the findings, Kunz consented to the sanctions and to the entry of findings that he willfully violated Rule 15/-1(a)(I) of the Exchange Act (Reg Bl) by recommending that two retail customers invest in a speculative, unrated debt security. The findings stated that the bonds that Kunz recommended to the customers were considered speculative, involved a high degree of risk, were illiquid, and were only suitable for persons with substantial financial resources and with no need for liquidity. Both customers had a stated moderate risk tolerance with an investment object of income and neither included speculation.
Brokers are required to adhere to the SEC’s Regulation Best Interest (Reg BI) standard of care under the Securities Exchange Act of 1934 which establishes a ‘best interest’ standard for broker-dealers and associated persons. This standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.
There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which requires brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations includes three components. First, the advisor must have an understanding of the potential risks, rewards, and costs associated with a product, investment strategy, account type, or series of transactions. Next, the advisor must have a reasonable understanding of the specific retail investor’s investment profile. The customer’s profile information generally includes an investor’s financial situation and needs; investments; assets and debts; marital status; tax status; age; investment time horizon; liquidity needs; risk tolerance; investment experience; investment objectives and financial goals; and any other information the retail investor may disclose in connection with the recommendation or advice. Finally, the advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided is in the retail investor’s best interest.
Brokerage firms and advisors must also understand the features and limitations of various account types as part of meeting Reg BI’s care obligations. Firms typically offer a variety of account options and services with different trading costs, services, such as account and activity monitoring. An advisor’s recommendation as to what type of securities account to open can alter the customers’ overall costs and investment returns. The advisor must determine that the client can benefit from the type of account being recommended to be opened and in the investor’s best interest taking into account the costs, benefits, and needs of the client.
Kunz has been in the securities industry for more than 44 years. Kunz has been registered as a Broker with Westpark Capital, Inc. since 2017.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.