In the Matter of Arthur James Huff

Arthur Huff (defendant) was a vice president and senior registered options principal (SROP) in the compliance department of PaineWebber Incorporated (PW) in New York. Huff was responsible for developing, implementing, and overseeing firm-wide options-related procedures. Dennis Greenman was a salesman in PW’s Miami, Florida, branch office. Philip Huber was the Miami branch manager. Prior to Huff’s arrival, PW’s compliance department reviewed Greenman’s activities and, after the legal department approved the account documentation for Greenman’s accounts, concluded that any concerns had been satisfactorily resolved. After Huff arrived, the compliance director gave him a substantial number of files, including the department’s file on Greenman, and instructed him to keep on top of Greenman’s activities and follow through if any question arose. Huff reviewed Greenman’s file and selectively monitored Greenman’s accounts but did not consider Greenman a compliance concern because the compliance department had addressed and resolved the issues. Greenman subsequently defrauded his clients of over $7 million by engaging in unauthorized options trading and sending clients fictitious account statements. The Securities and Exchange Commission (SEC) (plaintiff) sanctioned Huber and the Miami office’s regional manager for failing to supervise Greenman and instituted an administrative proceeding against Huff. An administrative-law judge found that Huff failed reasonably to supervise Greenman, with a view to preventing his violations of the securities laws, and Huber, with a view to preventing his deficient supervision of Greenman. Huff appealed.