The Securities and Exchange Commission (SEC) has fined One Oak Capital Management, a registered investment advisory firm based in the New York area, along with one of its representatives, Michael DeRosa, for transferring clients from brokerage accounts to advisory accounts that led to significantly higher fees.
The SEC imposed a $150,000 fine on One Oak and a $75,000 fine on DeRosa, also suspending him from the industry for nine months.
“We remain committed to holding investment advisors accountable when they breach their fiduciary duties to retail clients,” says Tejal Shah, associate regional director in the SEC’s New York office. “One Oak and DeRosa transitioned clients to advisory accounts in a manner that increased their own compensation, but the move was not in the clients’ best interests.”
Without admitting or denying wrongdoing, One Oak and DeRosa, 75, settled the SEC’s charges. Neither responded to requests for comment.
The SEC alleges that between June 2020 and October 2023, DeRosa moved more than 180 commission-based brokerage accounts from an unaffiliated firm, where he was also employed, to advisory accounts at One Oak. Many of the affected clients were elderly and had longstanding relationships with DeRosa.
“One Oak and DeRosa failed to uphold their fiduciary duty by not adequately disclosing that these conversions would lead to substantially higher fees for clients and increased compensation for DeRosa,” the SEC states. “They also did not properly disclose the inherent conflict of interest. Clients paid significantly more in fees but did not receive additional services or benefits.”
For advisors operating within both the broker-dealer and RIA channels, account selection remains a crucial aspect of client service. Advisors must determine whether a fee-based advisory model or a commission-based brokerage structure aligns better with a client’s needs, considering factors such as investment objectives, age, and trading frequency.
Fox Chase Capital Partners, the brokerage firm where DeRosa previously worked, appears to have ceased operations. The firm lacks an active website, and its registration with the Financial Industry Regulatory Authority (FINRA) was terminated in December 2023. A phone number listed in regulatory records is no longer operational.
According to the SEC, the accounts that transitioned to the advisory model had relatively low trading activity both before and after the switch. Despite this, One Oak and DeRosa did not ensure that clients were fully informed about the differences in fees between their previous brokerage accounts and the new advisory structure.
The SEC further alleges that DeRosa did not consistently provide clients with investment management agreements (IMAs) containing clear fee schedules, as required by One Oak’s compliance policies. In approximately 60 cases, clients did not receive an investment agreement at all.
“In some instances, an assistant under DeRosa’s supervision provided clients with IMAs that lacked a fee schedule,” the SEC states. “After clients signed the agreements, the assistant inserted the advisory fee without informing them. These clients were never given completed IMAs or any other documentation detailing the specific advisory fees they would be charged.”
