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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
PAINEWEBBER CLAIMS FUND DIRECT INVESTMENTS ADMINISTRATOR SECURITIES DISTRICT PURCHASERS EXCHANGE COMMISSION PAID PARTNERS COURT CLASS ACTIONS RELATING REPRESENTATION OBLIGATION RISKS MORTGAGE FAMILIES SALE MARKETING SOLD PROPRIETARY DIRECT INVESTMENTS COMPENSATE CONTAINED THEREIN DENYING ADMITTING PURSUANT YORK SOUTHERN DISTRICT |
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 14787 /January 18 , 1996
Securities and Exchange Commission v. PaineWebber Incorporated,
United States District for the Southern District of New York,
96 Civ. 0331 (SHS)
The Securities and Exchange Commission ("SEC") announced that the
Honorable Sidney Stein of the U.S. District Court for the
Southern District of New York today entered a Final Order against
PaineWebber Incorporated ("PaineWebber") pursuant to Section
21(e) of the Securities Exchange Act of 1934. PaineWebber
consented to the Order without admitting or denying the
allegations contained therein. The Final Order establishes a $40
million claims fund to be used to compensate purchasers of
public, proprietary direct investments sold by PaineWebber from
1986 to 1992. The claims fund will be administered by an
independent claims administrator, to be appointed by the Court in
the next seven days. Pursuant to the Order, PaineWebber is
required to pay $40 million into the claims fund and will also be
responsible for the cost of administering the claims fund.
On January 18, 1996, the SEC issued an administrative order
charging PaineWebber with, among other things, violations of the
anti-fraud provisions of the federal securities laws in the
marketing and sale of limited partnership interests and other
"direct investments" from 1986 to 1992. Simultaneously with the
institution of the administrative proceeding, and without
admitting or denying the findings contained therein, PaineWebber
consented to the entry of a SEC Order.
The SEC Order finds, among other things, that from 1986 to 1992,
PaineWebber prepared and distributed sales and marketing
materials for four families of direct investments --
PaineWebber/Geodyne oil and gas programs, PaineWebber Insured
Mortgage Partners, PaineWebber/Independent Living Mortgage, and
Pegasus Aircraft Partners -- that overstated the benefits and
understated the risks of these investments, and characterized
these direct investments as suitable for conservative investors
without sufficiently disclosing the risk of loss of principal.
In addition, PaineWebber sold direct investments to numerous
investors for whom they were unsuitable and in concentrations too
high given the investors' age, financial condition,
sophistication and investment objectives. (see Securities Act of
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