a) It is OK to break it into 2 sections, although it would have been preferred to have announced this possibility in any pre-tournament publicity. I assume you did not think that the low turn-out was likely and prepare for this possibility?
b) The players should understand, especially if the distribution is as you say, then an OVER 1800 and UNDER 1800 sections might be fair to everyone. You just need to make sure that the players are still competing against the other players in the rating class for prizes, although they may get paired with someone outside of their class, and that you let the players know this as well.
c) Since the original prize fund is $10,000 then you are still legally obligated to pay out 50% of that prize fund. So, if you break it into 2 sections, you could have $2,500 in prizes for the OVER 1800 section and $2,500 in prizes for the UNDER 1800 section totalling the required $5,000. If in the OVER 1800 section you have an overwhelming majority of A players, I would attempt to keep their prize structure as close as you can to the original prize structure and distribute the rest of the $2,500 to the other classes in the section. Example: say your original class A section prize structure totalled $1,500, then give your A players the same prizes, and spread out the other $1,000 to the master and expert player(s) in the OVER 1800 section. Same process for the players in the UNDER 1800 ($1,500 to the C players and $1000 to the B and D players). It is VERY important to still pay out the 50% of the original advertised prize fund as you would not want to instead be legally responsible for triple damages otherwise. Also, let the players know the revised prize structure as soon as you can, preferably BEFORE the first round starts!! That way at least you can say to anyone who disagrees with the revised structure that they had the opportunity to withdraw and get their entry fee back.
I am a local TD and my question is to my more experienced collegues. Let's say I organize and direct a tournament with the prize fund of, let's say 10,000 and based on 150 paid entries. I advertise it as the tournament with 6 sections and with 3 prizes for each section. However, as the time comes I find out that only 45 people show up with majority of players in sections A and C. There is only 1 master and 1 expert. In this case:
a) Should the tournament be broken down in less then 6 sections i.e should there be 3 sections? 2 sections? Should it be an open?
b) How ethical is it to announce that we don't have 6 sections but less?
c) How would the prize distribution be?
Thanks