The Securities and Exchange Commission (SEC) on Thursday announced its first enforcement actions under a non-solicitor municipal advisors rule that took effect in 2016.

The agency charged Texas- and Colorado-based Choice Advisors and two of its principals with engaging in unregistered municipal advisory activities in violation of Municipal Securities Rulemaking Board (MSRB) Rule G-42. The MSRB rule establishes core standards of conduct for municipal advisors that partake in non-solicitor municipal advisory activities.

Choice Advisors was founded in May 2018 by Matthias O’Meara and Paula Permenter, who previously worked at a national municipal underwriting firm registered with the SEC. There they had served as registered representatives responsible for underwriting certain municipal bond offerings, according to the SEC.

The agency does not name the underwriter, though Permenter and O’Meara each most recently worked at BB&T Capital Markets prior to launching Choice Advisors, according to the latter’s website.

O’Meara and Permenter had not registered Choice Advisors with either the SEC or the MSRB before taking on four charter schools—each inexperienced in municipal finance—as clients in 2018, the SEC alleged. “Choice’s attorney had specifically advised O’Meara and Permenter not to provide municipal advisory services until after Choice was registered and that, if they nevertheless engaged municipal advisory clients prior to Choice being registered, this fact should be disclosed to the schools,” according to the agency. “Nevertheless, the two co-founders failed to follow this guidance and improperly provided municipal advice to the four schools prior to Choice’s registration.”

The two also allegedly failed to disclose conflicts of interest to the schools regarding a fee-splitting arrangement they agreed to with their former employer. The pact was unlawful, as “municipal advisors are prohibited from engaging in fee-splitting arrangements with underwriters on any offering for which the municipal advisors provide advice,” the SEC noted.

O’Meara was also cited for allegedly operating in a dual capacity while still employed by the underwriter, which allowed him to increase fees and ultimately drained one school of approximately $40,000 in additional costs.

The SEC charged Choice Advisors and O’Meara with violating the municipal advisor fiduciary duty, deceptive practices, fair dealing, and registration provisions of the federal securities laws and is seeking civil penalties among relief in the case, filed in U.S. District Court for the Southern District of California. Permenter agreed to a settlement with the agency and will pay $26,000 in addition to consenting to other training and oversight requirements.

The SEC highlighted the enforcement actions are part of a handful the agency has pursued in recent years against municipal advisors providing services to schools.