Geneos Wealth Management, Inc. (CRD #120894, Centennial, Colorado)

March 18, 2022 – An AWC was issued in which the firm was censured, fined $150,000, ordered to pay $250,710.41, plus interest, in restitution to certain customers who purchased an alternative mutual fund, and required to establish and implement policies, procedures, and internal controls reasonably designed to address and remediate the issues pertaining to alternative mutual funds identified in the AWC. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to reasonably supervise its registered representatives’ recommendations of an alternative mutual fund. The findings stated that the firm did not have a reasonably designed supervisory system with respect to the approval and recommendation of alternative mutual funds. The firm had no system or procedures to determine whether a new mutual fund constituted a complex product or was an alternative mutual fund, such that heightened due diligence of the product may be appropriate. Rather, in reviewing and approving new alternative mutual funds, the firm subjected them to the same standards as traditional mutual funds, which did not evaluate the potential risks and rewards associated with the strategy of the funds. In addition, the firm did not have any WSPs advising firm principals how to supervise recommendations of alternative mutual funds. Furthermore, the firm utilized an electronic trade review system to assist with the supervision of the trading activity of the firm’s financial professionals. However, the system was not modified to account for risk factors associated with alternative mutual funds that would warrant heightened principal review. As a result, certain of the firm’s alternative mutual fund transactions may not have been identified for additional suitability review, even for customers with low risk tolerances. The findings also stated that the firm negligently omitted to tell investors material information concerning an offering of limited partnership interests in an entity. The firm made at least three sales of the limited partnership interests totaling $165,000 and earned a total of $11,550 in commissions from the sales. However, in connection with the sales the firm representatives did not inform the customers that the issuer failed to timely make required filings with the Securities and Exchange Commission (SEC), including filing audited financial statements. The firm voluntarily offered to purchase the limited partnership interests held by the three customers at issue in this AWC and those offers were accepted. For that reason, this AWC does not contain any order of restitution relating to the firm’s sales. (FINRA Case #2019061764701)