Neuberger unit settles with SEC for $2.7m over improper expenses

A unit of Neuberger Berman has settled for almost $2.7 million with the Securities and Exchange Commission after the regulator found that the subsidiary had improperly allocated compensation-related expenses to three private equity funds it advised.

NB Alternatives Advisers advises certain private equity funds sponsored by Neuberger and has about $49 billion in assets under management. From 2011 to 2016, it managed three private equity funds known as the Dyal Funds, which invest in asset managers in exchange for a percentage of the managers’ profits.

The SEC found that NBAA was charging employees’ compensation expenses to the funds instead of only charging for the time spent providing services to the asset managers. The agency said that of the $28.7 million in expenses paid by the Dyal Funds from 2012 through 2016, about $2 million was paid for time spent on tasks not related to employees’ work for the asset managers.

The SEC also stated that NBAA didn’t have any policies in place to “prevent the misallocation of compensation related expenses.” Part of NBAA’s settlement – without admitting or denying the findings – included a civil penalty of $375,000.

“We are pleased to resolve this matter and remain committed to conducting our business in a manner that is transparent and fully consistent with the highest standards of our investors and regulators,” a Neuberger spokesman told pfm in an email.

The SEC has been focused on fee-related issues in the private equity industry. Late last year, TPG Partners was fined $12.8 million by the agency for issues related to monitoring fees, as reported by pfm.