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

According to the SEC’s order, from approximately June 2020 through October 2023, One Oak and DeRosa recommended that DeRosa’s customers at an unaffiliated broker-dealer, at which he was simultaneously employed, convert more than 180 brokerage accounts to advisory accounts at One Oak. Most of these customers were elderly and had been long-time customers of DeRosa’s at the broker-dealer, which charged the customers on a commission basis.

According to the order, One Oak and DeRosa ignored their fiduciary duty and failed to adequately disclose that the conversions from brokerage accounts to advisory accounts would result in significantly higher fees for the clients and increased compensation for DeRosa; nor did they disclose the resulting conflict of interest. The order finds that the change in fee structure resulted in significantly increased costs, but the clients generally received no additional services or benefits.

The order further finds that One Oak and DeRosa failed to adequately consider whether it was in their clients’ best interests to convert their brokerage accounts to advisory accounts, and in fact, many of the accounts were not suitable to be advisory accounts.

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, and that One Oak also violated the compliance rule provisions of the Advisers Act.

Without admitting or denying the SEC’s findings, One Oak consented to an order requiring it to pay 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. 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.