On September 13, 2019, the Commission filed a complaint against McDermott Investment Advisors, LLC ("MIA"), a registered investment adviser; Defendant Dean Patrick McDermott (“McDermott”), MIA's owner and principal; and Relief Defendant McDermott Investment Services, LLC ("MIS"). The Commission alleged that between March 2013 and December 2014, McDermott and MIA unlawfully invested their clients in a version of a security that charged significant transactional sales charges when the identical security without these costs was available. The Commission alleged that, by causing their clients to pay these avoidable fees, the defendants violated their fiduciary duty to seek best execution of these transactions on behalf of their clients. The Commission further alleged that the defendants violated their fiduciary duty by failing to disclose to their clients the conflict of interest inherent in these transactions – that a version of the securities without the transactional sales charges was available, and that the majority of the unnecessary transactional costs incurred by the defendants’ clients was paid to relief defendant MIS, McDermott’s 100%-owned and controlled broker-dealer. See Complaint.

Following a trial and jury verdict, on October 28, 2022, the Court entered final judgments that, in relevant part, ordered McDermott, MIA, and MIS, to jointly and severally pay $143,379.33 in disgorgement and $50,983.60 in prejudgment interest; MIA to pay $110,000 in civil penalties; and McDermott to pay $50,000 in civil penalties. See the Final Judgments. The defendants and relief defendant have paid in full and the Commission holds $354,362.93 in an interest-bearing account. 

By order entered February 23, 2023 upon motion by the Commission, the Court established a Fair Fund so that collected civil penalties can be distributed to harmed investors along with collected disgorgement and prejudgment interest; appointed Heffler, Radetich & Saitta, LLP as the tax administrator for the Fair Fund; directed the transfer of funds from the Court Registry Account to the SEC; and authorized the SEC to approve payment of taxes and tax administration expenses without further Court Order. See Order. 

On August 31, 2023, the Commission filed an Amended Motion for an Order to Show Cause, seeking an Order to Show Cause why the Court should not approve the Commission’s proposed plan of distribution (the "Proposed Plan"). See the Commission’s Amended Motion.

Also on August 31, 2023, the Court granted the Commission’s motion and entered an Order to Show Cause. Individuals and entities who were clients of McDermott and MIA, and who paid avoidable transactional sales charges imposed by McDermott and MIA in connection with the purchase of unit investment trusts during the period March 1, 2013 through December 31, 2014, inclusive, or other interested parties, have until September 30, 2023 to show cause, if there is any, why the Court should not enter an Order approving the Proposed Plan. The process by which cause can be shown is set forth in the Order to Show Cause. See the Court’s Order to Show Cause and the Proposed Plan.

On October 11, 2023, the Court entered an order approving the Distribution Plan (the “Plan”). See the Court’s Order and the approved Distribution Plan

For more information, please contact the Commission:

Office of Distributions
Email: ENFOfficeofDistributions@sec.gov