The SEC on Dec. 17 issued a cease and desist order to NB Alternatives Advisers LLC for misallocating funds used to pay employees for certain business tasks.
NB Alternative Advisers was ordered to pay disgorgement of $2,073,988, prejudgment interest of $284,620 and a civil money penalty of $375,000.
NB Alternative Adviser and its affiliates managed three private equity funds, known as the Dyal Funds, from 2011 to 2016. The funds acquired minority stakes in alternative investment management companies, also called partner managers. NB Alternatives created an employee group called the business service platform, or BSP, to provide support to the partner managers.
From 2012 to 2016, the SEC said that some BSP employees did not work exclusively on assisting partner managers. Instead, they spent some time working with the investment team, including raising capital for the funds. Any time spent on non-BSP-related tasks should have been allocated to NB Alternatives and its affiliates, but the entire compensation amount was allocated to the Dyal Funds' advisers.
In total, $28.7 million was paid to these employees from the Dyal Funds from 2012 to 2016, with about $2 million paid for time not spent on BSP-related tasks, according to the SEC. The company also did not disclose the expenditures to the Dyal Funds' advisory committees or investors.