According to FINRA, Thomas Lee Johnson (CRD #1215434) of Carmel, Indiana, was barred from associating with any FINRA member firm in all capacities after an SEC decision became final on April 23, 2024. This action arises from FINRA Case #2018056848101.
Johnson was found in violation of securities regulations for converting $1,058,620.19 that was mistakenly deposited into his personal brokerage account due to a currency conversion error involving South Korean securities. Rather than reporting the obvious error and returning the funds, Johnson failed to verify or investigate the erroneous deposit and instead withdrew the funds to his personal checking account.
This case represents a textbook example of conversion, which is the unauthorized taking or misuse of funds or property belonging to another. In the securities industry, conversion is treated as one of the most serious forms of misconduct. When funds are mistakenly deposited into an account due to an operational error, the account holder has a legal and ethical obligation to report the discrepancy and return the funds. Using mistakenly deposited funds for personal purposes constitutes theft, regardless of how the funds came to be in the account.
The fact that this case involved a currency conversion error with South Korean securities indicates that the mistake likely occurred during the processing of an international securities transaction. Currency conversion errors can result in significant discrepancies due to exchange rate differences, and in this case, the error resulted in over one million dollars being incorrectly credited to Johnson's account. The size of the deposit should have been an obvious red flag requiring immediate investigation and reporting.
The SEC's involvement in this case, with the SEC decision becoming final, indicates that the matter was reviewed at the highest level of securities regulation. When FINRA disciplinary actions are appealed to or reviewed by the SEC, the SEC conducts an independent evaluation of the record and makes its own determination. The finality of the SEC decision means that all avenues of regulatory appeal have been exhausted.
Investors and industry professionals should understand that they have an affirmative obligation to report errors and discrepancies in their accounts. Keeping funds that were deposited in error is not a victimless act -- the funds belong to another party, and the failure to return them constitutes conversion. FINRA BrokerCheck will reflect this bar on Johnson's permanent record.
