Andrew M. Komarow, of West Hartford, Connecticut, a stockbroker formerly registered with LPL Financial LLC, has been barred by United States Securities and Exchange Commission (SEC) from being a stockbroker or investment advisor representative because Komarow engaged in a free-riding securities trading scheme. In the Matter of Andrew M. Komarow, Order Instituting Administrative Proceedings, File No. 3-21859 (February 20, 2024).
The term “freeriding refers” to the practice of buying shares or other securities in a cash account and then selling them before the purchase has settled. When a trader freerides, they may pay for the shares using money from the proceeds of the sale instead of cash. Freeriding is a violation of the Federal Reserve Board’s Regulation T and may result in the suspension of the trader’s account.
On December 8, 2023, SEC filed a complaint against Komarow in the United States District Court for the District of Connecticut. The Commission’s complaint alleged that, from 2022 to 2023, Komarow made ACH transfers of $6,900,000.00 from multiple bank accounts to accounts at broker dealers.
The regulator contended that he engaged in speculative trading with the resulting credits before the transfers were cancelled for insufficient funds. Although Komarow’s trading at each broker dealer was largely unprofitable, he removed funds from two accounts in which he had engaged in free-riding. This scheme left the broker dealers with losses exceeding $3,000,000.00.
On December 20, 2023, the court entered a judgment by consent against Komarow, permanently enjoining him from future violations of Securities Exchange Act of 1934 Section 10(b) and SEC Rule 10b-5. Civil Action No. 3:23-cv-01599.
On June 15, 2023, Komarow was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because he refused to provide testimony and to produce information and documents requested by FINRA in connection with its investigation into a related matter. Letter of Acceptance, Waiver, and Consent No. 2022077422401.
Komarow’s employer, LPL Financial LLC, filed a Form U5 disclosing that it had terminated Komarow’s registration for processing ACH instructions for his own account, knowing there were not enough funds. The regulator indicated that he used credit to place trades, resulting in a negative balance. The firm later filed an amended Form U5, indicating that Komarow had caused a personal account to be opened and processed ACH instructions knowing the accounts had insufficient funds. He used credited funds to engage in trading that generated losses.
In response to FINRA’s requests, Komarow produced certain documents but did not fully respond to the request for information and documentation. Ultimately, Komarow neither testified nor produced all the information FINRA requested. Therefore, he violated FINRA Rules 8210 and 2010.
Komarow was associated with Royal Alliance Associates Inc. in West Hartford, Connecticut from December 13, 2022, to January 4, 2023. He was associated with LPL Financial LLC in West Hartford, Connecticut from April 26, 2016, to December 22, 2022.
