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FINRA Files Complaint Against John Joseph Arnold, Alleging His False Statements Allowed Imposter to Steal $127,200

FINRA filed a disciplinary complaint against broker John Joseph Arnold, formerly of Merrill Lynch's Newport Beach, California branch, alleging that he failed to confirm the identity of a customer requesting a wire transfer, falsely told his sales assistant that he had confirmed the identity, and thus, allowed wire transfers totaling $127,200 of one customer's funds to be sent to third-party bank accounts that turned out to be requested and owned by imposters.

FINRA OHO Disciplinary Proceeding #2013038333001

According to Enforcement, Arnold instructed his sales assistant to wire a total of $127,200 to third-party bank accounts after he received a message from the e-mail address of one of his customers, which turned out to be an imposter posing as that customer. The report states that the imposter hacked into to the customer's e-mail account and, pretending to be the customer, sent a series of fraudulent wire transfer requests from that e-mail address.

The complaint alleges that Arnold falsely represented that he verbally confirmed the e-mailed wire transfer instructions with his customer, which is required by Merrill Lynch policy, when he in fact did not verbally speak with his customer about the wire transfer requests. As a result of the false statements, the wire requests went through.

The document also states that Arnold failed to obtain a Letter of Authorization from this customer, which pursuant to firm policy, is required for transfers in excess of $50,000. Instead, Arnold allegedly split the requests into several smaller amounts over multiple consecutive business days, thereby disguising from the firm the true amount of the wire request in an attempt to evade the Letter of Authorization requirement.

Arnold even allegedly wrote to the imposter via e-mail that, "We've had a lot of fraudulent attempts at wire transfers via email lately," yet still failed to make contact with his genuine customer and get verbal confirmation of the wire transfer requests, even while aware of the threat of email-perpetuated fraud.

When a supervisor subsequently asked Arnold about the second wire transfer request, Arnold purportedly made a false representation that his customer needed the wire transfer to pay for medical costs; this fake reason also was recorded in Merrill Lynch's books and records.

As such, FINRA formally accused Arnold of making false statements in order to facilitate wire transfer requests and making an additional false statement to a firm supervisor in order to conceal his misconduct. FINRA's four causes of action against Arnold include misrepresentations, structuring a wire transaction, and causing false books and records. The case remains pending and no decision has yet been made as to FINRA'S allegations.

According to his BrokerCheck report, Merrill Lynch discharged Arnold for failing to properly verify the identity of a customer prior to executing a transaction. The registration record indicates Arnold is presently associated with Raymond James & Associates, Inc. of Newport Beach, CA.

If you have invested with John Joseph Arnold or with any broker or financial adviser whose failure to confirm your identity prior to executing a transaction has resulted in fraud or allowed an imposter to access your funds, and this or a similar unauthorized transaction has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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