Choice Advisors, LLC and Matthias O’Meara
SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26142 / September 30, 2024
Securities and Exchange Commission v. Choice Advisors, LLC and Matthias O’Meara, No. 3:21-cv-01669-JO-MSB (S.D. Cal. filed Sept. 24, 2021)
SEC Obtains Final Judgment Against Municipal Advisor and its Co-Founder
On September 24, 2024, the U.S. District Court for the Southern District of California entered a final judgment against municipal advisor Choice Advisors, LLC and one of its principals, Matthias O'Meara. The Court ordered permanent injunctive relief as well as total monetary remedies of $187,337 against Choice and $312,572 against O'Meara. The final judgment follows the Court's April 15, 2024 grant of partial summary judgment to the SEC, ruling that Choice and O'Meara had violated their fiduciary obligations and engaged in unregistered municipal advisory activities, among other violations.
The SEC's complaint alleged that Choice and O'Meara entered into an impermissible fee-splitting arrangement with an underwriter to bond offerings in which their municipal advisory clients were borrowers. The SEC further alleged that O'Meara improperly worked on different sides of the same transaction, simultaneously serving as both a municipal advisor as well as a registered representative to the underwriter. According to the SEC, Choice's and O'Meara's municipal advisory activities were unlawful because they were not registered with the SEC or the Municipal Securities Rulemaking Board (MSRB). Moreover, the complaint alleged that the defendants breach their fiduciary obligations by failing to disclose the conflicts of interest created by their unregistered status and by O'Meara's dual role.
The Court previously denied the defendants' motion to dismiss the SEC's complaint on September 13, 2022. On April 15, 2024, the Court granted the SEC partial summary judgment against the defendants, finding that both defendants breached their fiduciary obligations in violation of Section 15B(c)(1) of the Securities Exchange Act of 1934 and MSRB Rule G-42, and that they failed to deal fairly with their clients in violation of MSRB Rule G-17. Moreover, the Court held that the defendants' fee-splitting arrangement with the underwriting firm violated MSRB Rule G-42. The Court also ruled that Choice failed to register with the SEC and the MSRB in violation of Section 15B(a)(1)(B) of the Exchange Act and MSRB Rule A-12, and that both defendants violated Section 15B(c)(1) of the Exchange Act by engaging in municipal advisory activities in contravention of MSRB rules.
In its final judgment, the Court (i) ordered O'Meara to pay disgorgement plus prejudgment interest in the amount of $179,081 and a civil penalty of $133,491; (ii) ordered Choice to pay disgorgement plus prejudgment interest in the amount of $107,448 and a civil penalty of $79,889; and (iii) permanently enjoined both defendants from future violations of the securities laws and MSRB rules identified above.
The SEC's case was handled by William Salzmann, Sheila O'Callaghan and Andrew Hefty, and supervised by Marc Katz of the SEC's San Francisco Regional Office. The investigation was conducted by Mr. Salzmann and Joseph Chimienti of the Division of Enforcement's Public Finance Abuse Unit.