A company that sells support services to insurers and other financial services companies has agreed to pay $21.4 million to settle an investigation by the U.S. Securities and Exchange Commission.

The SEC has accused the company, BISYS Group Inc., Roseland, N.J., of “aiding and abetting” efforts by mutual fund family advisors to hide compensation arrangements from July 1999 to June 2004.

BISYS rebated about $230 million in fund administration fee revenue to the fund family advisors so that the advisors would continue to recommend that BISYS be retained as the fund administrator, SEC officials say.

The arrangements let the advisors use investors’ mutual fund assets to pay for marketing expenses rather than paying for those expenses out of their own assets, SEC officials allege.

The BISYS case is the SEC’s “first case to highlight the role of mutual fund administrators in facilitating the use of mutual fund assets by investment [advisors] to pay marketing expenses,” Randall Lee, director of the SEC’s Los Angeles office, says in a statement about the settlement.

BISYS has consented to the issuance of the SEC’s order approving the settlement without admitting or denying the SEC’s findings.

“We are glad to have reached closure on this issue so that we can move forward to build and strengthen our business,” says Fred Naddaff, president of the BISYS fund services unit.

SEC officials say BISYS cooperated with their investigation.

Once BISYS learned about the practices under investigation, the company’s board and senior managers hired outside lawyers to review all marketing arrangements, terminated all existing marketing arrangements, disciplined or terminated the employees involved with the arrangements under investigation, and implemented new compliance policies, BISYS says.

BISYS will be putting its settlement payments in a distribution fund that will compensate the mutual funds affected by the compensation arrangements, officials say.

The BISYS payments will include a $10 million civil penalty, $1.7 million in prejudgment interest, and $9.7 million in disgorgement of gains resulting from the compensation arrangements, officials say.