← Broker database 2024-08-05
FINRA Suspends Kim Ray Kunz and Orders Restitution for Regulation Best Interest Violations
According to FINRA, Kim Ray Kunz (CRD #718618), a registered representative based in Templeton, California, was fined $7,500, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $1,927 plus interest in partial restitution to a customer. Kunz was found in violation of Regulation Best Interest (Reg BI) for recommending that two retail customers invest in speculative, unrated debt securities that were inconsistent with their investment profiles.
Regulation Best Interest, which took effect in June 2020, requires broker-dealers and their associated persons to act in the best interest of retail customers when making investment recommendations. This means that a broker must have a reasonable basis for believing that a recommendation is in the customer's best interest, taking into account the customer's investment profile, including their risk tolerance, financial situation, and investment objectives.
FINRA's findings revealed that Kunz recommended that two retail customers purchase speculative, unrated debt securities that involved a high degree of risk, were illiquid, and were only suitable for persons with substantial financial resources who had no need for liquidity. Both customers had stated a moderate risk tolerance with an investment objective of income, and neither customer had indicated that speculation was part of their investment goals. Despite this, Kunz's recommendations resulted in one customer having a concentration of more than 65 percent of her liquid net worth in alternative investments, and the other customer having more than 30 percent of their portfolio in alternative investments. These concentration levels were grossly disproportionate to the customers' stated risk profiles and financial needs.
Kunz earned $1,927 in commissions from these transactions, which he was ordered to disgorge as partial restitution. Without admitting or denying the findings, Kunz consented to the sanctions through an AWC agreement issued on August 5, 2024. The three-month suspension was in effect from September 3, 2024, through December 2, 2024. This matter is documented under FINRA Case #2021070498103.
This case serves as an important reminder for investors about the protections afforded under Reg BI. Investors should be cautious of recommendations that involve high concentrations of speculative or illiquid investments, particularly when those recommendations do not align with their stated risk tolerance and investment objectives. Investors have the right to receive recommendations that genuinely serve their best interests, and they should not hesitate to question any investment that seems inconsistent with their financial goals.