Kyle William Chapman (CRD #6303483) — Broker Sanctioned Over GWG L Bond Misrepresentations

Kyle
William Chapman (CRD #6303483) — Broker Sanctioned Over GWG L Bond
Misrepresentations

Haselkorn & Thibaut, P.A., operating as Investment Fraud Lawyers,
represents retail investors who lost money after working with Kyle
William Chapman (CRD #6303483). In 2024, FINRA sanctioned Chapman for
unsuitable GWG L Bond recommendations and negligent misrepresentations
to a customer. If you invested with Chapman and suffered losses, you may
have a FINRA arbitration claim.

Who is Kyle William Chapman?

Kyle William Chapman, CRD #6303483, is a former registered
representative who worked at two broker-dealers that sold GWG L Bonds.
He is not currently registered with any FINRA member firm.

Background detail Record
Name Kyle William Chapman
CRD number 6303483
Registration type General Securities Representative; Investment Company and Variable
Contracts Products Representative
August 2018 – October 2020 WestPark Capital, Inc. (CRD #39914)
November 2020 – July 2022 American Trust Investment Services, Inc. (CRD #3001)
Termination July 8, 2022 (voluntary); amended U5 on December 12, 2022 disclosed
customer arbitration involving GWG L Bonds
Current status Not currently registered with any FINRA member

What FINRA found

On August 16, 2024, FINRA accepted a Letter of Acceptance, Waiver,
and Consent (AWC No. 2020068655901) against Chapman. The AWC found that
Chapman recommended speculative, unrated GWG L Bonds to a retail
customer and made negligent misrepresentations and omissions of material
fact about the investment.

Finding Detail
Violation Willful violation of Reg BI Rule 15l-1(a)(1) (for conduct on and
after June 30, 2020); violation of FINRA Rule 2111 (for conduct before
June 30, 2020); violation of FINRA Rule 2010
Product GWG L Bonds — unrated, speculative corporate bonds issued by GWG
Holdings
Customer One retail customer with $350,000 liquid net worth and moderately
aggressive risk tolerance
Investment objectives Income and preservation of capital; did not include speculation
Investment recommended $28,000 in January 2020 and $22,000 in December 2020, totaling
$50,000
Concentration At least 14 percent of the customer’s disclosed liquid net worth in
L Bonds
Commissions Chapman earned $1,471
Misrepresentations Told customer GWG was still acquiring life insurance policies;
called the company “more secure” after the Beneficient merger; said only
5- or 7-year bonds were a concern; sent risk reports scoring L Bonds as
“1” (same as cash)
Fine $5,000
Disgorgement $1,471 plus interest from December 15, 2020
Suspension Three months from associating with any FINRA member in all
capacities

What GWG L Bonds were

GWG Holdings, Inc. sold L Bonds to retail investors through a network
of broker-dealers, including WestPark Capital and American Trust. The
bonds were not secured by GWG’s life insurance portfolio and were not
rated by any bond rating agency. Offering documents stated the bonds
were speculative, high-risk, illiquid, and suitable only for persons
with substantial financial resources and no need for liquidity.

In January 2022, GWG defaulted on its obligations to L Bond investors
and suspended sales. In April 2022, GWG filed for bankruptcy. Many
investors lost access to their principal and expected income.

How Chapman misrepresented
the risk

The customer initially contacted Chapman about investing in GWG L
Bonds. Chapman then sent third-party risk reports that scored the bonds
as “1” on a 1–100 risk scale — the same score assigned to cash. He told
the customer the reports were meant to “ease [the customer’s] mind even
more about the GWG L Bonds.”

Before the second purchase in December 2020, the customer emailed
Chapman and asked whether GWG L Bonds were “still very conservative.”
Chapman did not correct the customer. Instead, he negligently stated
that:

  • GWG was still acquiring life insurance policies, when it had stopped
    in 2018–2019.
  • It was “normal” for a company like GWG to operate at a loss for many
    years.
  • GWG was “more secure” after its merger with Beneficient, when the
    merger actually shifted GWG’s business model toward providing liquidity
    for illiquid investments and alternative assets — increasing risk.
  • The customer should only “worry about” the five- or seven-year
    bonds.

These statements were materially misleading and omitted facts
necessary to make the representations not misleading.

Why the recommendations
were unsuitable

Chapman did not conduct reasonable diligence before recommending the
bonds. He failed to understand that:

  • L Bonds were speculative and high-risk.
  • In a default, bondholders’ ability to enforce payment rights was
    restricted.
  • GWG’s shift away from life insurance policies toward
    alternative-asset liquidity increased risk.

The customer’s profile did not fit the product. The customer wanted
income and capital preservation, had only a moderately aggressive risk
tolerance, and ended up with at least 14 percent of liquid net worth in
a single speculative, illiquid issuer.

What the firms were required
to do

Both WestPark Capital and American Trust had obligations to supervise
Chapman’s recommendations. A reasonable supervisory system would have
reviewed:

  • Whether the representative understood the offering documents
  • Whether the customer profile matched the risk disclosure
  • Whether concentration in a single speculative issuer was
    appropriate
  • Whether marketing materials and risk reports were accurate
  • Whether the representative was making misleading statements in
    emails

The AWC notes that the customer later brought and settled an
arbitration against American Trust. Chapman was not a party to that
settlement.

How investors can recover
losses

If you lost money in GWG L Bonds recommended by Kyle Chapman or
another representative at WestPark Capital or American Trust, you may be
able to recover through FINRA arbitration. Useful evidence includes:

  • Account statements showing GWG L Bond purchases
  • Offering documents and private placement memoranda
  • Suitability questionnaires
  • Emails or correspondence with the broker
  • Risk reports or marketing materials provided to you

How Investment Fraud
Lawyers can help

Haselkorn & Thibaut, P.A., operating as Investment Fraud Lawyers,
reviews broker misconduct cases at no cost. We work on a contingency fee
basis: no recovery, no fee. If you invested with Kyle William Chapman or
another representative and have questions, call us at 1-888-885-7162 or
use our confidential contact form.

Legal disclaimer: Past results do not guarantee
future outcomes. Every case is unique, and recovery depends on the
specific facts, applicable law, and available defendants.

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