In March 2022, FINRA censured Geneos Wealth Management and sanctioned the firm to pay a $150,000 fine, as well as $250,710.41 in restitution and interest to affected customers who purchased LJM Capital Preservation and Growth Fund. The firm was also ordered to provide certification regarding the implementation of policies, procedures and internal controls to address concerns related to alternative mutual funds. FINRA found that Geneos Wealth Management had an unreasonable supervisory system for the approval and recommendation of alternative mutual funds. FINRA also found that Geneos Wealth Management “failed to tell three investors material information concerning a GPB Capital offering in 2018.”
According to the FINRA sanction, Geneos Wealth Management failed to reasonably supervise representatives’ recommendations of an alternative mutual fund—the LJM Preservation & Growth Fund (LJM), between November 9, 2016, and February 6, 2018.
“Geneos permitted the sale of LJM on its platform without having procedures reasonably designed to ensure that the firm and its representatives had a sufficient understanding of its risks and features, including the fact that the fund pursued a risky strategy that relied, in part, on purchasing uncovered options,” according to FINRA. “Geneos also lacked a reasonable supervisory system to review representatives’ LJM recommendations. Geneos representatives sold more than $2.5 million in LJM to customers. LJM’s value dropped 80% during an extreme volatility event in February 2018 and the fund ultimately liquidated and closed, resulting in losses for Geneos customers.”
FINRA also found that between April 27, 2018 and June 26, 2018, Geneos Wealth Management “negligently omitted to tell three investors in an offering related to GPB Capital Holdings, LLC (GPB Capital) that the issuer failed to timely make required filings with the Securities and Exchange Commission, including filing audited financial statements.”
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Geneos Wealth Management may be liable for investment or other losses suffered by its customers.
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