From June 2020 to October 2023, One Oak and Michael DeRosa recommended that DeRosa’s customers at an unaffiliated broker-dealer convert over 180 brokerage accounts to advisory accounts at One Oak. Most of these customers were elderly and had been long-time clients of DeRosa’s, who was also employed at the broker-dealer, which charged on a commission basis.
One Oak and DeRosa didn’t just ignore their fiduciary duty; they also conveniently forgot to mention that converting from brokerage accounts to advisory accounts would result in significantly higher fees for their clients and increased compensation for DeRosa. The kicker? The clients generally received no additional services or benefits.
The SEC’s order finds that One Oak and DeRosa willfully violated the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940. One Oak also violated the compliance rule provisions of the Advisers Act. One Oak consented to pay a civil penalty of $150,000 and to retain an independent compliance consultant. DeRosa agreed to a civil penalty of $75,000 and a nine-month industry suspension.
“We remain committed to holding accountable investment advisers who breach their fiduciary duties at the expense of retail clients,” said Tejal D. Shah, Associate Regional Director in the New York Regional Office. “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.”
