NASD Rule 10101 Forces Arbitration Between Two Brokers – From the Securities Law Home Page


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Court Compels Arbitration Based on NASD Rule 10101

Scott (Relator Zachary C.), In Re, 2003 WL 557009 (Tex. App., 2/27/03). Arbitrability * Arbitration Agreement (Form U-4) * FAA (§4 “Motion to Compel”) * SRO Rules (NASD Rules 10101, 10201 & 10216) * Breadth of Agreement.

Disputes, solely between associated persons, are arbitrable under Rule 10101. Scott and Truelson, both associated persons with Prudential, entered into a partnership to share commissions, with Scott ultimately to take over Truelson’s book upon his retirement. The partnership agreement did not contain an arbitration clause. Truelson filed an action for breach of the partnership agreement and the district court denied Scott’s motion to compel arbitration. The Court of Appeals “conditionally” granted Scott’s petition for Writ of Mandamus.

In applying a two-step analysis, the Court first concludes that the Federal Arbitration Act applies, noting that the subject matter of the partnership agreement involves interstate commerce and that both associated persons signed Forms U-4. The question whether the particular dispute was arbitrable is next addressed, the Court concluding that NASD Rule 10101(b) is ambiguous and susceptible to more than one reasonable interpretation. Nevertheless, the Court holds that, if an agreement is governed by the FAA, any doubts concerning the scope of the arbitrable issues should be resolved in favor of arbitration. (SLC Ref. No. 2003-11-02)



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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

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