SEC Sanctions Take Hold at PaineWebber

They weren’t taking new accounts Monday at the Beverly Hills office of PaineWebber Inc.

As part of stiff sanctions imposed last month by the Securities and Exchange Commission against the nation’s fifth-largest brokerage, the Rodeo Drive office and three others across the country began a one-month ban on opening new accounts.

PaineWebber agreed to the sanctions without admitting or denying guilt after the SEC alleged that the firm had defrauded investors in four states from 1986 to 1990. As part of the settlement, branch managers will enforce the ban themselves.

“This is one of the few situations where this kind of sanction has been used,” said Ellen Hersh, assistant regional administrator for the SEC’s Chicago office. “You very rarely limit the sales practice of the company.”

Despite the ban, Monday was business as usual for most of the 30 brokers in Beverly Hills, who referred ECEC

callers looking to open new accounts to the firm’s downtown Los Angeles office.

“The office is playing by the rules,” said Joseph J. Grano Jr., PaineWebber’s president of retail sales and marketing.

The Rodeo Drive office opens only about 100 new accounts a month on average, so the effect of the ban will be small, Grano said. But some in the industry expressed concern that the action will affect more than PaineWebber’s business.

“Whenever someone commits fraud in the securities industry, it gives a bad name to everybody,” said Ray Gross, owner of Southern California Securities, a small brokerage in Century City specializing in bonds. “And with the economy as bad as it is, it’s hard enough to do business without destroying investor confidence.”