stock

Investing.com -- The Securities and Exchange Commission (SEC) has filed settled charges against New York-based One Oak Capital Management LLC and its former investment adviser representative, Michael DeRosa. The charges are related to misconduct concerning advisory services provided to their retail clients.

The SEC's order established that from June 2020 to October 2023, One Oak and DeRosa advised DeRosa's customers at an unaffiliated broker-dealer, where he was also employed, to convert more than 180 brokerage accounts to advisory accounts at One Oak. The majority of these customers were elderly and had been DeRosa's long-term clients at the broker-dealer, which charged them on a commission basis.

The order outlines that One Oak and DeRosa neglected their fiduciary duty, failing to sufficiently disclose that the conversions from brokerage accounts to advisory accounts would result in significantly higher fees for the clients and increased compensation for DeRosa. They did not disclose the resulting conflict of interest either. The change in fee structure led to substantially increased costs, but the clients generally received no additional services or benefits.

One Oak and DeRosa also failed to adequately consider if it was in their clients' best interests to convert their brokerage accounts to advisory accounts. In fact, many of the accounts were not suitable to be advisory accounts.

Tejal D. Shah, Associate Regional Director in the New York Regional Office, stated, "We remain committed to holding accountable investment advisers who breach their fiduciary duties at the expense of retail clients. One Oak and DeRosa converted brokerage accounts to advisory accounts when it benefitted them through higher fees, but that conversion was not in their clients' best interests."

The SEC's order determined that One Oak and DeRosa intentionally violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940. Additionally, One Oak violated the compliance rule provisions of the Advisers Act. Without admitting or denying the SEC's findings, One Oak agreed to a civil penalty of $150,000 and to retain an independent compliance consultant to review certain of its policies and procedures related to its retail business. Similarly, without admitting or denying the findings in the order, DeRosa agreed to a civil penalty of $75,000 and to a nine-month industry suspension.

Alexander M. Levine, Hermann A. Vargas, and Liora Sukhatme, all of the New York Regional Office, conducted the SEC's investigation under the supervision of Ms. Shah. The SEC expressed appreciation for the assistance of Thomas Strafaci, Stephanie A. Morena, David Jaffe, and Jennifer A. Grumbrecht of the Division of Examinations in the New York Regional Office.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.