9th Cir.

United States Securities and Exchange Commission v. Choice Advisors, LLC, et al.

July 21, 2026 ·24-6447 ·Unpublished · By Maria Santos

The Ninth Circuit affirmed a district court ruling that a fee-splitting arrangement between a municipal advisor and a bank underwriter violated MSRB Rule G-42. The court upheld the imposition of permanent injunctive relief, disgorgement, and civil penalties against the appellants.

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Background

The appellants, Choice Advisors, LLC and Matthias O’Meara, provided municipal advisory services to charter schools while simultaneously engaging in underwriting activities through an agreement with BB&T. The district court found this arrangement constituted an illegal fee-splitting arrangement under MSRB Rule G-42 and imposed remedies including injunctive relief, disgorgement, and civil penalties.

The court’s reasoning

The court held that MSRB Rule G-42 broadly prohibits fee-splitting arrangements between municipal advisors and underwriters to prevent conflicts of interest. The structure of the payment is irrelevant to the violation. Regarding remedies, the court found the district court did not abuse its discretion in issuing a permanent injunction because the appellants knowingly violated securities laws and failed to police themselves. The court also affirmed disgorgement and civil penalties, noting that proof of pecuniary harm to investors is not required for disgorgement and that the appellants failed to provide evidence of inability to pay.

What it means going forward

The decision reinforces strict prohibitions on fee-splitting in municipal advisory services and confirms that courts may impose significant financial penalties and injunctions even without proof of direct investor loss.