← Broker database 2021-11-02
Thomas Lee Johnson Barred for Converting Over $1 Million After Firm Pricing Error
According to FINRA, Thomas Lee Johnson was barred from association with any FINRA member in all capacities after he converted $1,059,544.98 from his firm following a system error that incorrectly credited his account.
The case originated when Johnson's firm incorrectly priced sales of South Korean securities he held. Due to a system error, the firm priced the sales in U.S. dollars instead of South Korean won, causing Johnson's account to be credited with over $1 million when he was actually entitled to less than $1,000. Rather than alerting the firm to the obvious error, Johnson moved the money to his personal bank account.
Johnson only returned the funds to his firm securities account after he discovered that the firm had corrected its error and reversed the credit, leaving his account with a negative balance. This sequence of events demonstrates that Johnson did not voluntarily return the funds out of honesty, but only after realizing the firm had discovered and corrected the error.
This decision was appealed to the National Adjudicatory Council (NAC), which affirmed the bar, and Johnson has further appealed to the Securities and Exchange Commission, so the bar remains in effect pending that review. Conversion—the unauthorized taking and use of another's property—is one of the most serious violations in the securities industry because it involves misappropriation of funds and a fundamental breach of trust.
This case serves as an important reminder about the legal and ethical obligations of registered representatives. When a system error results in an obvious windfall, the representative has a duty to immediately notify the firm rather than taking advantage of the mistake. The magnitude of the error—over one million dollars instead of less than one thousand—should have made it immediately apparent that something was wrong. Moving the funds to a personal account demonstrates intent to permanently deprive the firm of the money, which is the essence of conversion.
Investors should take comfort that FINRA takes conversion cases extremely seriously and permanently bars individuals who misappropriate funds. The bar ensures that Johnson cannot work in the securities industry again, protecting future customers from someone who demonstrated a willingness to take money that did not belong to him.