==========================================START OF PAGE 1======

                        UNITED STATES OF AMERICA
                               Before the
                   SECURITIES AND EXCHANGE COMMISSION


Securities Act of 1933
Release No. 7264 / February 22, 1996

Securities Exchange Act of 1934
Release No. 36870 / February 22, 1996

Administrative Proceeding
File No. 3-8955

PUBLIC ADMINISTRATIVE PROCEEDINGS INSTITUTED AGAINST DAVID
ARNOLD, DAVID EAST AND JERRY PAYNE

     The Commission announced the entry of an Order Instituting
Public Administrative Proceedings Pursuant to Section 8A of the
Securities Act of 1933 and Sections 15(b), 19(h) and 21C of the
Securities Exchange Act of 1934 (Order) against David Arnold
(Arnold), David East (East) and Jerry Payne (Payne), formerly
associated with the Birmingham, Alabama branch office of
PaineWebber, Inc. (PaineWebber).  
 
     The Order alleges that John Day (Day), a registered
representative associated with the Birmingham branch office,
engaged in a loss dumping and gain skimming scheme in the
accounts of two of his customers whereby Day purchased stock and
index options through PaineWebber's block desk in New York and
delayed allocating the trades until he determined whether the
prices of the options rose or fell.  If the price of the stock or
index options fell after the purchase at the block desk, Day
allocated the trades to the clients' accounts.  If the price of
the stock or index options rose after purchase, Day allocated the
trades to his own brokerage account or to the account of Arnold
or East, two other registered representatives employed at the
Birmingham branch office.  

     The Order alleges that Arnold facilitated Day's scheme by
arranging loans to Day from other customers of PaineWebber so
that Day could pay for the options allocated to his personal
brokerage account and obtain the profits.  The Order alleges that
East allowed Day to place profitable trades in East's account and
provided Day with fifty percent of the profits from these
transactions.  

     The Order further alleges that Payne, the manager of the
Birmingham branch office, failed reasonably to supervise Day with
a view to preventing his violations of the federal securities
laws.  The Order alleges, among other things, that Payne allowed
Day to continue executing option trades in the customer accounts
==========================================START OF PAGE 2======

even after he received notice that the accounts had not been
approved for options trading, that Payne failed to contact the
customers after their accounts appeared on PaineWebber's active
account reports, and that Payne allowed Day to continue executing
trades in the customer accounts even after being directed by the
customers that all trading in the accounts cease immediately. 

     A public hearing will be held to determine whether the
allegations included in the Order are true, to offer the
respondents an opportunity to establish any defenses to the
allegations and to determine what remedial sanctions, if any, are
appropriate.