Public Relations
PaineWebber Incorporated
1200 Harbor Blvd.
Weehawken, NJ 07087
201 902-6775
201 902-6225 Fax
PaineWebber
For Immediate Release
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Contact: Sarah Luke or Susan Thomson
(212) 713-8391
PAINEWEBBER ANNOUNCES FINAL RESOLUTION OF
LIMITED PARTNERSHIP ISSUES
NEW YORK, January 18, 1996 -- Paine Webber Group Inc. (NYSE: PWJ)
today announced a series of actions that, taken together, will
constitute a final and comprehensive resolution of the issues related
to the firm's sale of public proprietary limited partnerships in the
1980s and early 1990s. Those actions include:
* An agreement to settle all pending class actions;
* A settlement with the Securities and Exchange Commission (SEC);
and
* An agreement to settle with the various state regulators.
Terms of the Settlements
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The agreements announced today include a class action settlement
of $125 million and other non-cash consideration; an SEC
administrative order creating a capped $40 million fund; a civil
penalty of $5 million levied by the SEC; and payments aggregating $5
million to state securities administrators. In addition, PaineWebber
has paid claims that approximate $120 million over the past several
years primarily through the firm's pre-existing Early Dispute
Resolution processes, with commitments to pay $7.5 million of
additional investor claims, all as reflected in the SEC's
administrative order.
PaineWebber's previously-announced pre-tax charge of $200 million
in the second quarter of 1995 will cover the costs of resolving all
these limited partnership claims, with the exception of certain
administrative expenses related to the settlements and their
implementation. PaineWebber will take a fourth quarter 1995 pre-tax
charge of $30 million to cover these additional expenses. The
difference between the $230 million in pre-tax charges and the total
sums 1) paid or to be paid to settle client claims ($292.5 million);
2) to be paid to the SEC and various state regulators ($10 million);
and 3) reserves for administrative expenses ($30 million), principally
represents monies already paid in prior periods to clients and for
related expenses.
-more-
In a separate release, issued today, PaineWebber announced its
financial results for the fourth quarter and full year 1995.
As part of the SEC settlement, PaineWebber will retain an
independent consultant to review the firm's policies and procedures
concerning retail brokerage operations and the dissemination of sales
and marketing materials. In addition, a committee of PaineWebber
Incorporated's Board of Directors will oversee policies related to the
firm's compliance efforts, and monitor the implementation of any
recommendations by the consultant.
Resolution of Limited Partnership Issues
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Announcing the comprehensive resolution of limited partnership
issues, PaineWebber Chairman and Chief Executive Officer Donald Marron
commented:
"In addressing this matter over the past few years,
culminating in our announcement today, we pursued two
overriding objectives -- first, to resolve the issues raised
by clients and regulators responsibly and cooperatively;
and, second, to do everything we can to ensure that similar
issues do not recur. We have now achieved both of these
objectives, fulfilled our commitments to clients, and put
this matter behind us.
"We accept our full share of responsibility for the
situation that arose in connection with certain limited
partnerships sold in the 1980s and early 1990s, and we
deeply regret the deficiencies in certain past practices --
as well as the unauthorized and unacceptable behavior of a
small number of employees -- that led to these issues."
The company said, starting in the early 1990s, it had developed
advanced compliance and oversight practices, in order to enhance
safeguards for its clients. Among the many changes instituted, in
this regard, have been the enhancement of an Early Dispute Resolution
process for the prompt and fair resolution of legitimate client
concerns; the adoption of new guidelines for the management and
supervision of the firm's retail network; the development and
implementation of the Trade Monitoring System, which rapidly analyzes
trading data and provides Branch Managers with an effective
supervisory tool; increased legal and compliance staffing; and
modified compensation practices to reinforce the alignment of
interests between the firm's Investment Executives and its clients.
These efforts demonstrate the firm's commitment to industry leadership
on compliance issues.
"With these partnership issues now behind us, and our strong
operating performance discussed in our earnings release, we look to
the future with great confidence in the prospects for this firm and
its people," Mr. Marron concluded.
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