Court Compels Arbitration in Selling Away Case
Customer is “customer” of broker, therefore he is a customer of the firm?
Summit Brokerage Services, Inc. v. Cooksley, Case No.: CA 02-11137 AO (Fla. Cir. Ct., 15Dist., 11/1/02).
Agreement to Arbitrate * SRO Rules (NASD Rule 10301) * Statutory Definitions (Customer) * Arbitration Agreement * Selling Away.
That an investor never had a brokerage account with a broker-dealer does not preclude his being a customer, for purposes of the NASD Arbitration Code. Michael Cooksley initiated arbitration before the NASD, alleging that SBSs broker sold him fraudulent, unsuitable and unregistered promissory notes issued by 21st Century Satellite Communications. At the time, the broker was an associated person of SBS, but SBS claims that Mr. Cooksley never had a brokerage account with the firm and never signed an arbitration agreement.
NASD Rules can supply the basis for a contract to arbitrate, even in the absence of a bilateral agreement. Moreover, NASD Rule 10301 requires SBS to arbitrate with any customer who demands arbitration. No doubt exists that Mr. Cooksley was a customer of the broker, reasons the Court, and by dealing with Petitioners registered representative, Cooksley became a customer of that firm for purposes of NASD arbitration obligations . Therefore, based upon the foregoing, the Petition to Stay Arbitration is denied and the Motion to Compel Arbitration is granted. (SLA Ref. No. 2002-44-03)
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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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