The Financial Industry Regulatory Authority says it has censured and fined a Colorado-based broker-dealer for alleged failures in supervising its registered representatives’ recommendations.

From Nov. 9, 2016, to Feb. 6, 2018, Centennial, Colorado-based Geneos Wealth Management, allegedly failed to properly supervise its representatives who recommended LJM Preservation & Growth Fund, an alternative mutual fund with a “risky strategy” that included buying uncovered options, according to a letter of acceptance, waiver and consent published by Finra last week.

Geneos, which has around 340 registered representatives and operates on an independent contractor model, allegedly failed to ensure the representatives understood the fund’s risks and features, Finra says.

In all, Geneos’ representatives allegedly sold over $2.5 million in LJM to more than 80 customers, according to the letter of acceptances. One unnamed Geneos representative sold more than 60% of the total, Finra says. Then, in February 2018, amid “an extreme volatility event,” LJM’s value plunged 80%, leading the fund to liquidate and eventually close the following month and leaving Geneos customers with the losses, according to the letter of acceptance.

In addition, from April 27, 2018 to June 26, 2018, Geneos allegedly failed to tell three investors in an offering connected to GPB Capital Holdings that the issuer failed to submit audited financial statements and other requiring filings to the Securities and Exchange Commission in a timely manner, according to the letter of acceptance. Geneos allegedly earned $11,550 in commissions from at least three sales of limited partnership interests in Automotive Portfolio, one of GPB’s limited partnerships, Finra says.

Geneos consented to a censure and to pay a $150,000 fine as well as around $251,000 in restitution, plus interest, without admitting or denying the findings, according to the letter of acceptance.

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