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Regulation

Neuberger settles with SEC over improper expenses in Dyal funds

Neuberger Berman will return $2 million to limited partners and pay a civil penalty to settle charges of improper fees paid by investors in its Dyal Capital funds, according to a Securities and Exchange Commission order released Monday.

According to the SEC, Neuberger paid a group of workers at its Dallas-based NB Alternatives Advisers unit about $2 million from 2012 to 2016 for work that was unrelated to their duties. The amount was included in $28.7 million in expenses paid by Dyal Funds, but the firm did not disclose the charge to the funds' advisory committees or to investors paying the full compensation expense.

NB Alternatives Advisers works with certain private equity funds sponsored by Neuberger that take minority stakes in alternative investment firms. It manages $49 billion in assets, according to the order. The unit, Business Services Platform, provides client development, talent management, operational advisory and other services, support and advice to partner managers.

After SEC staff requested information about fee allocation practices for the Dyal funds, the firm voluntarily took steps to ensure that BSP employees worked exclusively on relevant tasks and improper allocation of BSP expenses ended in 2017, the SEC order said.

In addition to disgorging $2.1 million to investors, Neuberger Berman will pay $284,620 in interest and a $375,000 civil penalty.

The funds involved were: Dyal Capital Partners (A) LP, Dyal Capital Partners (B) LP, Dyal Capital Partners II (A) LP, Dyal Capital Partners II (B) LP, Dyal Capital Partners III (A) LP, Dyal Capital Partners III (B) LP, and their respective feeder funds.

A Neuberger spokesman in a statement said: "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."