Advertisement
YOU ARE HERE: LAT HomeCollections

PaineWebber in Talks to Settle SEC Allegations of Hidden Risks

February 08, 1995|From Bloomberg Business News

NEW YORK — PaineWebber Group Inc. is negotiating with the Securities and Exchange Commission to settle charges that some of the firm's brokers concealed risks associated with limited partnerships they sold, people familiar with the talks said.

The company may set up a fund to pay back investors who lost money in a small number of limited partnerships sold between 1980 and 1992, a person familiar with the early discussions said. PaineWebber sold more than $2 billion of real estate, energy and airplane-leasing partnerships during that time.

Should the preliminary talks conclude with the firm's opening a restitution fund, it is likely to be much smaller than the one Prudential Securities Inc. was required to open for investors in an agreement it reached in October with the Justice Department.

The Prudential Insurance Co. of America unit has pumped $660 million into a fund for investors who lost money on the more than $8 billion of limited partnerships the firm sold. The costs to Prudential could increase because the fund has no ceiling.

Regulators may look more favorably on PaineWebber's settlement efforts because that firm has tried to settle some claims filed by investors rather than forcing them into arbitration, lawyers following the case said.

PaineWebber declined to comment on the talks. The firm has said it "promptly and fairly resolved clients' claims and will continue to do so" when it finds that brokers used inappropriate marketing materials in offering the partnerships to investors for whom the securities were unsuitable.

SEC enforcement officials also declined to comment on the negotiations, which were first reported in Tuesday's Wall Street Journal. The agency is investigating PaineWebber as part of a broad review of Wall Street's limited partnerships sales.

The SEC is trying to determine whether PaineWebber misrepresented risks and rewards when it sold the partnerships, people familiar with the review said. Individuals lost money in such investments as property and energy prices declined.

Advertisement
Los Angeles Times Articles
|
|
|