The Financial Industry Regulatory Authority has fined a rep $10,000 and suspended him for 45 days for making unauthorized trades in clients' accounts and texting about securities-related transactions.
According to FINRA's order, from April 2022 through May 2024, Joseph Warner Rozof placed more than 250 discretionary trades in the accounts of two Harley Capital customers.
On July 2, 2024, Harley Capital — a brokerage firm based in Westport, Connecticut — filed a Form U5 disclosing that it had discharged Rozof for violating FINRA's Discretionary Accounts Rule 3260.
"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," according to FINRA's order.
The firm also had not accepted any of the accounts for discretionary trading.
Rozof also used his personal cell phone, an unapproved channel, for securities-related communications.
From March 2022 through June 2024, Rozof used a personal cell phone to exchange text messages with 27 customers of Harley Capital (including the two customers in whose accounts he placed discretionary trades and two family members) about securities-related business, the order states.
For instance, "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. Rozof did not use such system, nor did he otherwise provide the text messages to the firm for review or retention, according to FINRA.
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