Former LPL Advisor Barred by SEC for Free Riding Scheme
Published On: July 5, 2024

On June 12, 2024, the Securities and Exchange Commission filed a cease-and-desist order against former investment advisor, Kerry Lee Broderick, barring her from “association with any broker, dealer, investment adviser […]” and “participating in any offering of a penny stock […] with a broker, dealer, or issuer for purposes of the issuance or trading in any penny stock.” The sanction is a result of her participation in a “free riding” scheme largely perpetrated by her then-employer, Andrew Komarow, beginning in October 2022.

What is Free Riding?

Free riding is the illegal practice of purchasing or trading securities in a brokerage account and selling them before the initial purchase is fully processed. The practice exploits the “immediate access” credit some brokerage firms give their customers so they can start trading as soon as transfer is initiated.

Details of the Scheme

According to the SEC’s initial complaint against Komarow, from October 13, 2022, to January 30, 2023, Andrew Komarow “knowingly, or at least recklessly,” made 23 ACH transfers totaling $6.9 million to several personal accounts across four brokerage firms. None of the bank accounts he used to make these transactions had anywhere close to that amount of money in them. For example, the very first transaction he initiated was for $200,000 from a bank account that had less than $60,000. Later, he initiated a $400,000 ACH transfer from another bank account that only had $100. Neither the brokerage firms nor the two banks included in the filing were named. They were simply referred to as “Broker-Dealer” 1 – 4 and “Bank” A – B.

Komarow was working as a Certified Financial Planner for LPL Financial at the time. Broker-Dealer 1 informed LPL of the number of concerning transactions in his personal account and restricted his access in late October 2022. Somehow, Komarow managed to persuade Broker-Dealer 1 to reinstate his access to the account and later opened six more accounts with the firm for the purpose of continuing his scheme.

That’s where Kerry Broderick comes in. Komarow used Broderick’s login credentials at Broker-Dealer 1 to make three separate transactions between December 1 – 2, 2022. All three transactions were canceled due to insufficient funds shortly thereafter. When Broderick received a call from the brokerage firm about the transactions, Komarow told her via chat message to “lie, whatever you have to do to get those trades placed.” He also offered her a bonus for her continued assistance.

On November 17, 2022, LPL Financial terminated Andrew Komarow as a result of the fraudulent activities on his numerous personal accounts at Broker-Dealer 1. He would go on to try the same free riding at three more brokerage firms, Broker-Dealers 2 – 4, with very little success. Ultimately, all four brokerage firms were left with negative account balances totaling $3,352,407. Komarow withdrew $615,031 in trading profits.

Both Komarow and Broderick were eventually sanctioned and barred from working in the trading and securities field by the SEC, citing violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Though Broderick willfully participated in the illegal activity, it was clear that she was something of a patsy in her former employer’s short-lived, yet nefarious scheme. Most, if not all, of the culpability falls at the feet of Andrew Komarow, and it appears he’s been ostensibly punished.

Komarow’s Advocacy Work

But sadly, the situation is much worse than it seems. Komarow was, and presumably still is, an advocate for special needs individuals and their families. After being diagnosed with autism as an adult, he began to build a reputation for himself as a financial planning champion for neurodivergent people. He had articles published in Spectrum Life Magazine on topics such as the benefits of hiring neurodivergent employees and money management tips parents could teach their autistic children. He hosted and was featured on several podcasts discussing the topic of money and people on the spectrum. In 2018, he opened Planning Across the Spectrum, a financial planning firm dedicated to “helping any individual, family, or employer of those with autism and other disabilities to pursue financial independence.” The firm has since permanently closed.

He also became a Certified Neurodiversity Professional and his LinkedIn profile notes that he’s been a board member for the Spectrum Design Foundation since January 2023. On the surface, it seemed Komarow was one of the thousands of adults who learned of their own neurodivergence in recent years and decided to use his experience to make a difference. A very noble cause. However, it’s this advocacy work that makes his actions beginning in October 2022 all the more frustrating and upsetting. His image as an advocate for an often-misunderstood segment of society is forever overshadowed by his abject selfishness.

One would hope that this is some kind of learning experience for him and maybe he’ll be able to build his reputation back up in the future. But what about the clients who trusted him prior to October 2022? According to the SEC’s complaint, “not only were Komarow’s trades high-risk, but his activity in his personal brokerage account […] also adversely impacted his advisory clients at the Investment Advisor (LPL Financial) because Broker-Dealer 1 prevented Komarow from accessing any of his advisory client accounts that were held at Broker-Dealer 1.” To date, there have been no updates on what happened to his clients’ accounts or their money.

There may never be an answer to why Andrew Komarow decided to burn it all down. In truth, the question of why doesn’t matter. What matters is that those who trusted him and saw him not only as an advisor but as someone like them do not suffer for his actions.

If you were a client of Andrew Komarow prior to October 2022, you may have a claim. Call Stoltmann Law Offices, P.C. at 312-332-4200 for a no-obligation, initial consultation with an experienced securities arbitration attorney. We are a contingency fee law firm, which means we do not get paid unless you do.

Disclaimer

The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

PLEASE NOTE THIS IS ADVERTISING AND IT IS NOT A NEWSPAPER ARTICLE OR POST FROM AN INDEPENDENT OR NON-BIASED, NEWS SITE, NEWS SOURCE OR NEWSPAPER.

Chicago Investment Fraud Attorneys Offering Nationwide Representation to Investors

If you have suffered financial losses because of the negligence or fraud of your financial advisor or broker through unsuitable investment recommendations, over-concentration, churning, misrepresenting risks, conversion or selling away, you have legal rights and options to pursue recovery of those losses.

Stoltmann Law Securities Investment Fraud Attorneys