PaineWebber Is Target of SEC Inquiry : Investigation: Regulators are looking at the sales of certain limited partnerships. The firm says the ‘vast majority’ were ‘sold appropriately.’

The Securities and Exchange Commission is investigating PaineWebber Group Inc. 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 about $2 billion of partnerships that invested in assets such as real estate and energy projects, people familiar with the review said. Individuals lost money in such investments as property and energy prices declined.

PaineWebber, the nation’s fourth-largest securities firm, said Tuesday that it is “cooperating with an SEC inquiry into the sale of certain limited partnership investments.” The firm said the “vast majority” of the partnerships were “sold appropriately and professionally.”

PaineWebber also said it has “promptly and fairly resolved clients’ claims and will continue to do so” when it finds sales that used inappropriate marketing materials or offerings to investors for whom the securities were unsuitable.

The SEC is reviewing the sales practices of a number of securities firms, including Merrill Lynch & Co., that were active in selling limited partnerships, according to people familiar with the review. The investigation of PaineWebber is more specific, according to people close to the situation, who refused to be more specific.

The SEC declined to comment on the investigation.

PaineWebber, the nation’s fourth-largest securities firm, was among the biggest marketers of partnerships. It sold $2 billion of real estate, energy and airplane-leasing limited partnerships between 1980 and 1992.

For instance, investors bought units in Pegasus Aircraft Partners 1 in late 1988 and early 1989 for $1,000 each. The minimum purchase, in most cases, was five units. They could sell their units for about 5 cents on the dollar today, according Robert A. Stanger & Co., a consulting company.

PaineWebber stock fell $1.25 Tuesday, or almost 9%, to $13.

The investigation comes after Prudential Securities Inc. reached an agreement last month with the Justice Department in which the firm admitted to criminal wrongdoing in its sales of $8 billion in limited partnership interests. The Prudential Insurance Co. of America unit is on three years probation and had to double the size of a fund to repay investors as much as $660 million.

The Prudential case led the SEC to look at partnership sales by other firms, the people familiar with the review said.

Sales practices across Wall Street are “remarkably similar,” said Thomas Grady, a Naples, Fla., attorney who represents investors.