Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Michael Derosa (Derosa), previously associated with Fox Chase Capital Partners, LLC, has at least one disclosable event. These events include one tax lien, alleging that Derosa recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on February 14, 2025.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, against One Oak Capital Management, LLC (‘One Oak’); and against Michael DeRosa (‘DeRosa’) (together, ‘Respondents’). In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the ‘Offers’) which the Commission has determined to accept. The commission finds that from approximately June 2020 through October 2023 (the ‘Relevant Period’), One Oak, a registered investment adviser, and one of its investment adviser representatives, Michael DeRosa, failed adequately to disclose advisory fees to certain clients converting their brokerage accounts at an unaffiliated broker-dealer to advisory accounts at One Oak (the ‘Converted Accounts’). As a result of these conversions, One Oak and DeRosa charged the Converted Accounts advisory fees based on a percentage of assets under management, rather than just brokerage commissions, as they were previously charged by the broker-dealer. Because the Converted Accounts had relatively little trading activity before and after the conversions, the change in fee structure resulted in significantly increased costs for clients, even though these clients generally received no additional services or benefits. One Oak and DeRosa therefore placed their financial interests ahead of the interests of the prospective clients in recommending the conversions. In addition, One Oak and DeRosa did not conduct meaningful reviews of the clients’ investment profiles or the characteristics of the two account types. As a result, One Oak and DeRosa did not have a reasonable basis to believe that an advisory account was in their clients’ best interests, either at the time of conversion or thereafter. In fact, many of the Converted Accounts were not suitable to be advisory accounts. One Oak also had compliance deficiencies related to the Converted Accounts during the Relevant Period. Additionally, for many of the Converted Accounts, One Oak did not provide a Form ADV at the time of account opening. As a result of this conduct, One Oak willfully violated Advisers Act Sections 204, 206(2), and 206(4) and Rules 204-3 and 206(4)-7 thereunder, and DeRosa willfully violated Section 206(2) of the Advisers Act.
Brokers are required to adhere to the SEC’s Regulation Best Interest (Reg BI) standard of care under the Securities Exchange Act of 1934 which establishes a ‘best interest’ standard for broker-dealers and associated persons. This standard applies when a registered representative is providing investment advice through making recommendations customers and covers securities transaction, investment strategies, and recommendations concerning advice on opening of an account or accounts. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.
There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which requires brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations includes three components. First, the advisor must have an understanding of the potential risks, rewards, and costs associated with a product, investment strategy, account type, or series of transactions. Next, the advisor must have a reasonable understanding of the specific retail investor’s investment profile. The customer’s profile information generally includes an investor’s financial situation and needs; investments; assets and debts; marital status; tax status; age; investment time horizon; liquidity needs; risk tolerance; investment experience; investment objectives and financial goals; and any other information the retail investor may disclose in connection with the recommendation or advice. Using the foregoing information, the associated person then must consider reasonably available investment option to accomplish the investor’s goals as well as alternative investment options that may be cheaper or other important qualities. Finally, the advisor must conclude that there is a reasonable basis to believe that the recommendation being provided is in the investor’s best interest.
Brokerage firms and advisors must also understand the features and limitations of various account types as part of meeting Reg BI’s care obligations. Firms typically offer a variety of account options and services with different trading costs, services, such as account and activity monitoring. An advisor’s recommendation as to what type of securities account to open can alter the customers’ overall costs and investment returns. The advisor must determine that the client can benefit from the type of account being recommended to be opened and in the investor’s best interest taking into account the costs, benefits, and needs of the client.
Derosa has been in the securities industry for more than 33 years. Derosa has been registered as a Broker with Fox Chase Capital Partners, LLC since 2004.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.
