SEC widens its probe on limited partnerships

November 23, 1994|By New York Times News Service

NEW YORK -- After years of investigating Prudential Securities' improper sales of limited partnerships, government regulators are turning their attention to the rest of Wall Street.

The Securities and Exchange Commission's inquiry focuses on partnership sales by several of the country's biggest brokerage firms, including the PaineWebber Group, Merrill Lynch & Co., Dean Witter & Co. and Lehman Brothers, people with knowledge of the probes said yesterday.

The investigation, which is being handled out of several SEC offices, is examining whether the brokerage firms misled investors about the safety and potential returns from a series of limited partnerships.

The SEC's enforcement division began the investigation last spring after several months of informally studying partnership sales materials from about 10 Wall Street firms.

The formal order of investigation, captioned "In the Matter of Certain Limited Partnership Sales," whittled down that number to zTC just four firms. It does not specify any individual partnerships that are being examined.

As a result, the enforcement staff from the agency's offices in Washington and Chicago is not limited in terms of which partnership sales it can examine in the investigation. The agency has subpoenaed sales material and other records from a number of the firms pertaining to partnership sales dating back to 1980.

The formal order of investigation incorrectly names Smith Barney as one of the firms under investigation, people with knowledge of the situation said. But the investigation actually pertains to partnership sales made by Shearson Lehman Hutton, whose assets were purchased by Smith Barney last year. Lehman Brothers is the successor brokerage to Shearson.

In a statement, PaineWebber confirmed that it was cooperating with the SEC inquiry.

PaineWebber added that it believed the majority of the partnerships were sold properly but that in instances where it had found "that inappropriate sales materials were used to influence client investment decisions, or that limited partnerships were sold to investors for whom they were unsuitable" the firm had promptly resolved client claims.

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