A former representative for Harley Capital has been penalized over infractions of Financial Industry Regulatory Authority rules, Think Advisor reports.
In a letter of acceptance, waiver and consent, FINRA said that it has suspended Joseph Warner Rozof for 45 days and fined him $10,000 for making unauthorized trades in clients’ accounts and texting about securities-related transactions.
FINRA states that “From April 2022 through May 2024, Rozof placed over 250 discretionary trades in the brokerage accounts of two Harley Capital customers without the written authorization required by FINRA Rule 3260(b).” FINRA’s order goes on to state, “”Although Rozof discussed his trading strategy with the customers generally, he did not speak with the customers about the specific trades on the dates of the transactions. Rozof did not have written authorization from the customers to exercise discretion over their accounts.”
It was also determined that Rozof also used his personal cell phone to exchange business-related text messages with 27 Harley Capital customers, preventing the firm from preserving those messages, in violation of FINRA Rule 4511. “Rozof recommended the purchase and sale of securities and discussed fund transfers in customer accounts via text messages,” the order states. “He also used his personal cell phone to respond to and otherwise communicate with other firm employees regarding securities-related business.”
Harley Capital’s written supervisory procedures provided that such business-related text messaging be made only through a firm-approved system that captured and stored those messages, which the firm was then able to supervise. FINRA said Rozof did not use the system, and did not provide the text messages to the firm for review or retention.
Rozof accepted and consented to FINRA’s findings without admitting or denying them.
The rules Rozof were found to have violated are as follows:
FINRA Rule 3260(b) prohibits registered representatives from exercising any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member, in accordance with Rule 3110.
FINRA Rule 4511(a) requires each member “make and preserve books and records as required under the FINRA rules, the Exchange Act and the applicable Exchange Act rules.” Section 17(a) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a4(b)(4) require member firms to maintain for a period of not less than three years the originals of all communications received, and copies of all communications sent, by the member relating to the member’s business, including text messages and other electronic messages.
In July 2024, Connecticut-based Harley Capital filed a Form U5 disclosing that it had discharged Rozof for violating FINRA’s Discretionary Accounts Rule 3260.
Hyman Cotter PC routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. If you think your financial professional or firm engaged in misconduct that caused investment losses, contact the Chicago investor fraud attorneys of Hyman Cotter PC to schedule a free consultation by calling 312-291-4600 or through our online contact form.
