FIRST-EVER 'GLOBAL' SETTLEMENT RESOLVES FEDERAL, STATE CLAIMS AGAINST PRUDENTIAL
WASHINGTON, Oct. 21 /PRNewswire/ -- Under an unprecedented "global" settlement reached by the U.S. Securities and Exchange Commission (SEC), 49 state securities regulators and the National Association of Securities Dealers (NASD), Prudential Securities Incorporated will be required to establish an open-ended $330 million claims fund for defrauded investors who suffered losses as a result of massive misconduct in Prudential's sale of partnership deals from 1980 to 1990. State securities regulators have established a hotline (800-220-9125) to provide investors with information about the settlement and how to make a claim on the fund. The settlement was jointly developed by the SEC's Enforcement Division and a task force representing the 49 states that have indicated their intention to participate in the settlement. The SEC will receive $10 million in penalties. Each state participating in the settlement will receive $500,000, for a potential total of $26 million in state- level penalties (including the District of Columbia and Puerto Rico.) The NASD will receive $5 million from Prudential. Iowa Superintendent of Securities Craig Goettsch, who also serves as president of the North American Securities Administrators Association (NASAA), commented: "This settlement is a home run. It serves the best interests of both securities law enforcement and small investors. It can even be called revolutionary, since the investor claims fund of $330 million has no ceiling.
Through such efforts as a special toll- free '800' number and the plain-English notice that will be distributed to Prudential customers, state securities regulators are going the extra mile to ensure that this settlement is as 'investor-friendly' as possible. Our goal here is simple: we want to put as much money back into the hands of as many defrauded investors as possible ... and as soon as possible."
The SEC and state securities regulators alleged that Prudential Securities Inc. committed a wide range of violations of state and federal securities laws. Between 1980 and 1990, an estimated 320,000 investors nationwide placed their savings in more than 700 Prudential limited partner-ships, including real estate and energy development deals. Many of the investors were misled as to the risky nature of the partnership investments. In addition to the open-ended claims fund of $330 million, Prudential Securities already has paid $260 million to investors through prior settlements and awards. Most recently, another $491 million was raised through the liquidation of some partnerships. Key elements of the global settlement are as follows: -- A court-supervised claims fund will be established by Prudential with a deposit of $330 million. If the fund is exhausted, Prudential is still required to cover all valid claims. If some portion of the fund is not expended, the remainder will revert to the U.S. Treasury, rather than being returned to Prudential. -- A court-approved independent claims administrator will (1) oversee the claims fund and (2) ensure that investor claims are settled and arbitrated fairly and expeditiously. The claims administrator, Irving M. Pollack, is a Washington attorney. He retired from the SEC in 1980 after 30 years of service. In addition to serving as a commissioner for six years, he held a number of other positions at the commission, including Enforcement Division director. -- Prudential will waive its statute of limitations defense for those investors who seek to resolve their partnership claim through the settlement process. Investors will be eligible to submit a claim even if the time limit has expired to file a lawsuit or arbitration claim outside of the settlement process. Investors whose arbitration cases or lawsuits were dismissed solely on statute-of-limitation grounds will also be eligible to submit claims. -- A penalty of $10 million will be paid to the SEC. State securities regulators could receive as much as $26 million, at the rate of $500,000 per state. The NASD will receive a $5 million payment. -- A number of remedial sanctions will be imposed to prevent the recurrence of problems at Prudential Securities and to assist the SEC and states in meeting their oversight obligations, including: -- Prudential shall establish a new Compliance Committee of its board of directors to monitor the firm's observance of federal and state securities laws. -- Prudential shall establish and maintain full-time regional compliance officers for each of its operating regions in the United States. -- Prudential shall have its independent auditors conduct three annual surveys of Prudential clients in order to determine compliance with sales practice standards, including suitability and accurate representations concerning investment products. -- Prudential will evaluate its current policies and procedures and implement any new or revised policies needed to detect securities law violations. Areas to be included in the review are: (1) excessive trading in customer accounts; (2) prohibitions against sales of unsuitable securities; (3) disclosure to customers of margin account information; (4) the hiring and retaining of brokers with significant disciplinary history and/or multiple customer complaints; and (5) supervision of mutual fund sales to prevent abuses. In order to deal with an anticipated surge of investor inquiries about the global settlement, the state securities regulators who comprise the membership of NASAA have established a toll-free hotline, 800-220-9125. Eligible Prudential investors who call the "800" number will be provided with a plain-English document describing the settlement and how to make a claim on the fund. The toll-free number will be in operation for one month from the date of this announcement. The jurisdictions indicating that they will participate in the settlement include all 50 states (except for Texas). Additionally, the securities regulatory agencies in the District of Columbia and Puerto Rico have indicated that they will accept the settlement arrangement with Prudential. The five-state Prudential task force consisted of: Arizona Securities Division Assistant Director of Securities for Trading & Markets Matthew J. Neubert; Florida Division of Securities Director Don Saxon; Idaho Securities Bureau Chief Wayne Klein (chair); New Mexico Securities Division Director Nancy M. Smith; and Virginia Division of Securities Director Lewis Brothers. In the United States, NASAA is the national organization of the 50 state securities agencies responsible for investor protection and the efficient function of the capital markets at the grassroots level. -0- 10/21/93 /NOTE TO EDITORS: A copy of the document available to investors from the NASAA "800" hotline is available upon request./ /CONTACT: Scott Stapf of The Hastings Group, 703-276-1116, for the North American Securities Administrators Association/
CO: U.S. Securities and Exchange Commission; National Association of
Securities Dealers; Prudential Securities Incorporated; North American Securities Administrators Association ST: District of Columbia IN: FIN SU:
MH-DC -- DC012 -- 5133 10/21/93 11:24 EDT
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|Date:||Oct 21, 1993|
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