Finra Bars Ex-RBC Broker Accused of Stealing $1.1 Million Windfall
A former broker in Indiana who pocketed $1.1 million that RBC Wealth Management-U.S. mistakenly deposited into his brokerage account has been barred permanently from working at a U.S. broker-dealer.Thomas Lee Johnson “acted knowingly” when he withdrew funds that RBC had transferred into his account as a result of a foreign currency conversion error, a Financial Industry Regulatory Authority hearing panel ruled on Friday.
Johnson, who first registered as a broker in 1983, “knew all along the money was not his to keep,” chief hearing officer Michael H. Dixon wrote. “It was too good to be true.”
The broker, who worked at Dean Witter Reynolds, Lehman Brothers and Smith Barney before joining RBC in Indianapolis in 2009, did not return a call for comment.
Johnson was fired by Royal Bank of Canada’s U.S. wealth unit in December 2017, and now operates a registered investment advisory firm called Royal Capital Wealth Management in Carmel, Indiana. It managed $108 million in assets as of February, according to its latest ADV filing with the Securities and Exchange Commission.
The Finra sanction does not prevent Johnson from working as an investment adviser. His lawyer, Jon-Jorge Aras of Levan Legal in Bala Cynwyd, Pennsylvania, did not return a request for comment on whether his client will seek to appeal Finra’s decision.
Johnson’s windfall resulted from a currency translation error RBC made in 2017 when it liquidated his warrants in South Korea’s Doosan Heavy Industries & Construction Co. after switching transfer agents. RBC listed the liquidated value at $1,059,544.98 instead of the actual value of $951.01, according to the hearing panel report.
Johnson returned the money to his brokerage account from a bank account after RBC reversed the error a week later, creating an account deficit. He said he and his team had misinterpreted the warrant values by reading them as U.S. dollars instead of Korean won when they attempted to verify the deposit on a Bloomberg terminal, according to the decision.
The hearing panel said he should have escalated the “obvious error” to superiors or to the firm’s trading desk.
“Johnson did not contact anyone…because he hoped that RBC would never catch its error and he would reap an extraordinary 1,000-fold windfall at his employer’s expense,” Dixon wrote in the decision. “It would require the suspension of disbelief and an utter display of naiveté for the Panel to find otherwise.”
The hearing officers dismissed a charge from Finra’s enforcement unit that Johnson misled investigators with his testimony. Inconsistencies between his on-the-record testimony and his assistants were not material, they wrote.