                       PUBLISHED


UNITED STATES COURT OF APPEALS
             FOR THE FOURTH CIRCUIT


RAYMOND JAMES FINANCIAL                
SERVICES, INCORPORATED,
                 Plaintiff-Appellee,
                v.
PETER CARY; DAYNA SMITH;
ROBERT BARKIN; CHRISTINE SPOLAR,
            Defendants-Appellants,
               and                          No. 12-1053
FINANCIAL INDUSTRY REGULATORY
AUTHORITY,
                         Defendant.


PUBLIC INVESTORS ARBITRATION BAR
ASSOCIATION,
    Amicus Supporting Appellants.
                                       
        Appeal from the United States District Court
     for the Eastern District of Virginia, at Alexandria.
              Gerald Bruce Lee, District Judge.
                 (1:11-cv-00928-GBL-TRJ)

                 Argued: January 30, 2013

                  Decided: March 8, 2013

       Before WILKINSON, KEENAN, and WYNN,
                    Circuit Judges.
2         RAYMOND JAMES FINANCIAL SERVICES v. CARY
Affirmed by published opinion. Judge Wilkinson wrote the
opinion, in which Judge Keenan and Judge Wynn joined.


                         COUNSEL

ARGUED: John Stringer Chapman, CHAPMAN & ASSO-
CIATES, LLC, Cleveland, Ohio, for Appellants. Stephen
Grey Cochran, ROEDER & COCHRAN, PLLC, McLean,
Virginia, for Appellee. ON BRIEF: Alin L. Rosca, JOHN S.
CHAPMAN & ASSOCIATES, LLC, Cleveland, Ohio; J.
Casey Forrester, ECONOMOU, FORRESTER & RAY, Alex-
andria, Virginia, for Appellants. Braden W. Sparks, BRADEN
W. SPARKS, PC, Dallas, Texas; Lisa A. Catalano, Director,
ST. JOHN’S UNIVERSITY SCHOOL OF LAW, Securities
Arbitration Clinic, Jamaica, New York; Gina-Marie Scarpa,
ST. JOHN’S UNIVERSITY SCHOOL OF LAW, Securities
Arbitration Clinic, Queens, New York, for Amicus Support-
ing Appellants.


                         OPINION

WILKINSON, Circuit Judge:

   Appellants are individual investors seeking to arbitrate
claims against appellee Raymond James Financial Services
("RJFS") that arose when the investors purchased allegedly
fraudulent securities directly from Inofin, Inc. ("Inofin"). As
a member of the Financial Industry Regulatory Authority
("FINRA"), RJFS has agreed to arbitrate any dispute with a
"customer" that "arises in connection with the business activi-
ties" of the firm. Appellants contend that they are RJFS cus-
tomers because they purchased Inofin securities on the advice
of an attorney who, though lacking any formal affiliation with
RJFS, was a business and personal acquaintance of an RJFS
registered representative.
          RAYMOND JAMES FINANCIAL SERVICES v. CARY            3
   For the reasons that follow, we hold that appellants are not
"customers" of RJFS within the meaning of the FINRA arbi-
tration provisions. To compel arbitration here would be to
expand the scope of the arbitration agreement beyond what
the text permits and the parties intended. Therefore, we affirm
the judgment of the district court.

                               I.

   Inofin is a Massachusetts corporation that raised over $110
million from hundreds of investors between 1994 and 2010.
Around 2003, Inofin president Michael Cuomo recruited his
former college roommate Kevin Keough, then a registered
representative of Morgan Stanley Dean Witter, Inc. ("Morgan
Stanley"), and David Affeldt, Keough’s friend, brokerage cus-
tomer, and tax attorney, to refer investors to Inofin. These
investors purchased unregistered promissory notes directly
from Inofin, believing that the company was investing in sub-
prime auto loans.

   According to the Securities and Exchange Commission
("SEC"), Keough wanted to avoid receiving referral compen-
sation directly from Inofin because he was employed by Mor-
gan Stanley, a regulated broker-dealer. Cuomo and Keough
thus agreed that Inofin would pay Keough’s wife, Nancy
Keough ("Nancy"), for Keough’s referrals. Sometime in 2003,
Nancy and Affeldt agreed to share equally in any referral fees
they received from Inofin, regardless of who made the actual
referral. At the time this agreement was concluded, Keough
was still employed by Morgan Stanley. Three years later, in
2006, he joined RJFS, and his wife continued to share Inofin
referral fees with Affeldt.

   In January 2011, Inofin revealed that it was insolvent fol-
lowing protracted losses that began in 2004 after the company
commenced new types of lending that were not properly dis-
closed to investors. Shortly after Inofin’s financial state came
to light, the company entered bankruptcy, and the SEC insti-
4         RAYMOND JAMES FINANCIAL SERVICES v. CARY
tuted civil enforcement proceedings against the company and
its executives for violations of the federal securities laws.

   Appellants Peter Cary, Dayna Smith, Robert Barkin, and
Christine Spolar are Inofin investors who sustained losses on
the unregistered promissory notes. They purchased the notes
between 2006 and 2008 after Affeldt "personally met with
each of [them] and recommended each invest in Inofin." J.A.
84. Both Nancy and Affeldt received commissions from Ino-
fin for these transactions.

   On May 24, 2011, the investors filed a joint FINRA State-
ment of Claim against RJFS, alleging, inter alia, violations of
state securities laws and FINRA conduct rules. The investors
alleged that Keough assured them that "their investments
were fully collateralized by auto loans" when Inofin was actu-
ally "operating a Ponzi scheme" in which executives diverted
the invested funds "towards propping up their own failing
businesses" and "covering personal expenses." J.A. 23, 26.
The investors sought arbitration of their claims pursuant to
FINRA Rule 12200, which requires FINRA members such as
RJFS to arbitrate disputes "between a customer and a member
or associated person of a member" if arbitration is "requested
by the customer" and the dispute "arises in connection with
the business activities of the member or the associated per-
son."

   On September 2, 2011, RJFS commenced this lawsuit in
the Eastern District of Virginia, seeking declaratory and
injunctive relief barring arbitration of the investors’ claims on
the grounds that the FINRA arbitration provisions do not
apply to the dispute because appellants "are not and have
never been [RJFS] customers." J.A. 11. Shortly thereafter, the
parties stipulated to the following "key operative facts" con-
cerning the putative relationships among appellants, Affeldt,
Inofin, and RJFS:

    1.   The investors had "no personal contact" with
         Keough regarding Inofin.
          RAYMOND JAMES FINANCIAL SERVICES v. CARY            5
    2.   Affeldt "personally met" with the investors and
         "recommended each invest in Inofin."

    3.   The investors did not hold "any accounts includ-
         ing trade accounts" with RJFS "at any time."

    4.   Affeldt did not tell the investors that he was
         "acting for a person who claimed to be" an RJFS
         representative.

    5.   Affeldt "did not represent" to the investors that
         he was "affiliated with" RJFS.

    6.   The investors "did not understand that they were
         purchasing Inofin or any other security" from
         RJFS.

    7.   The investors "did not understand they were
         purchasing Inofin from an agent whom they
         believed to be authorized to act on behalf of"
         RJFS.

   Following a hearing on the matter, the district court found
that the connection between RJFS and appellants was "insuf-
ficient" to bring the dispute within the scope of the FINRA
arbitration provisions. J.A. 717. The district court therefore
granted RJFS’s motion for a permanent injunction barring
arbitration of the investors’ claims. This appeal followed.

                              II.

   Appellants (the investors) contend that their claims are sub-
ject to arbitration because David Affeldt, the attorney who
recommended the Inofin securities to them, had connections
to Kevin Keough, an RJFS registered representative. Appel-
lants urge us to read FINRA Rule 12200 broadly –- in accor-
dance with the judiciary’s longstanding presumption in favor
of arbitration—and find that they are, in fact, RJFS customers.
6         RAYMOND JAMES FINANCIAL SERVICES v. CARY
However, we conclude that no presumption in favor of arbi-
tration applies in this case and that appellants are not custom-
ers of RJFS under our established interpretation of Rule
12200. A customer very often relies upon the representations
or reputation of the entity with which the customer deals, but
in this case, the investors made their decision to invest inde-
pendently of any recommendation on the part of RJFS. To
find a customer relationship in such a situation would impose
responsibility on a company whose name was never so much
as utilized to induce the investors to part with their funds.

                               A.

   Appellants argue here, as they did below, that "any ambigu-
ity" in the term "customer" as it used in FINRA Rule 12200
must be resolved in their favor because of a "strong national
public policy favoring arbitration." Appellants’ Br. at 19.
Appellants rightly point out that arbitration is a favored mech-
anism of dispute resolution because it provides "speed, econ-
omy, and efficiency" and allows a self-regulatory
organization such as FINRA to police its members’ activities
by creating remedies not available in federal court for viola-
tions of the organization’s rules. Id. at 32. But while it is
beyond question that the Supreme Court has recognized such
advantages and adopted "a liberal federal policy favoring
arbitration agreements," CompuCredit Corp. v. Greenwood,
132 S. Ct. 665, 669 (2012) (quoting Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983))
(internal quotation marks omitted), appellants overlook the
fact that a court cannot apply any presumption in favor of
arbitration unless there already exists an enforceable arbitra-
tion agreement between the parties. See UBS Fin. Svcs. v.
Carilion Clinic, ___ F.3d ___, 2013 WL 239051, at *3 n.2
(4th Cir. 2013).

  Arbitration is "a matter of consent, not coercion," Volt Info.
Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S.
468, 479 (1989), and federal arbitration policy does not alter
           RAYMOND JAMES FINANCIAL SERVICES v. CARY                  7
that maxim. As this court has recently noted, the "touchstones
of arbitrability analysis" are the "twin pillars" of the parties’
"consent and intent" to arbitrate, Peabody Holding Co. v.
United Mine Workers of Am., 665 F.3d 96, 103 (4th Cir.
2012). The Supreme Court "has never held that the presump-
tion [in favor of arbitration] overrides the principle that a
court may submit to arbitration ‘only those disputes . . . the
parties have agreed to submit.’" Carilion Clinic, 2013 WL
239051, at *3 n.2 (quoting Granite Rock Co. v. Int’l Bhd. of
Teamsters, 130 S. Ct. 2847, 2858-59 (2010)). The presump-
tion, while certainly a critical component of the law governing
arbitration agreements, applies only when "a validly formed
and enforceable arbitration agreement is ambiguous about
whether it covers the dispute at hand," not when there remains
a question as to whether an agreement even exists between the
parties in the first place. Granite Rock Co., 130 S. Ct. at 2858;
see also Morgan Keegan & Co. v. Silverman, ___ F.3d ___,
2013 WL 425556, at *2 n.6 (4th Cir. 2013).

   When it accepted FINRA Rule 12200, RJFS agreed to arbi-
trate disputes with its customers, not with those who fall out-
side that category. As in both Morgan Keegan and Carilion
Clinic, where we also construed Rule 12200, an agreement to
arbitrate exists here "only if a customer requests arbitration
from a member." Carilion Clinic, 2013 WL 239051, at *3 n.2;
see also Morgan Keegan, 2013 WL 425556, at *2 n.6.
Whether appellants are customers thus relates to "the exis-
tence of a contract to arbitrate," not the "scope" of that poten-
tial agreement. Morgan Keegan, 2013 WL 425556, at *2 n.6
(emphasis added) (quoting Carilion Clinic, 2013 WL 239051,
at *3 n.2). As such, the presumption in favor of arbitration
does not apply to the question of appellants’ customer status,
and we must consider that issue under ordinary principles of
contract law.1 Id.
  1
   As we noted in Carilion Clinic, this court previously applied a pre-
sumption in favor of arbitration when construing the term "customer" in
8          RAYMOND JAMES FINANCIAL SERVICES v. CARY
                                  B.

   Appellants argue that they are customers of RJFS because
they purchased Inofin securities on the advice of Affeldt, a
personal friend and business acquaintance of RJFS registered
representative Keough. They emphasize that Keough received
commissions from Inofin for Affeldt’s sales to appellants,
suggesting that Affeldt was acting as Keough’s agent in the
transactions. This agency relationship, so the argument goes,
is enough to make appellants customers of RJFS because they
are customers of an agent of an RJFS representative.

   Although FINRA itself provides no precise definition of
"customer" as used in Rule 12200, our recent decisions in
Morgan Keegan and Carilion Clinic have defined that term to
mean "an entity that is ‘not a broker or dealer, who purchases
commodities or services from a FINRA member in the course
of the member’s business activities,’ namely, ‘the activities of
investment banking and the securities business.’" Morgan
Keegan, 2013 WL 425556, at *4 (quoting Carilion Clinic,
2013 WL 239051, at *4). Applying that definition to the facts
of this case, we conclude that appellants are not RJFS custom-
ers because they did not purchase any "commodities or ser-
vices" from RJFS or Keough in the course of the firm’s
business activities. Any connection appellants did have to
RJFS by virtue of their dealings with Affeldt is far too remote
to make them customers of RJFS.

   With respect to the Inofin transactions, the appellant inves-
tors had no direct customer relationship with RJFS or

"somewhat similar circumstances" in Washington Square Securities, Inc.
v. Aune, 385 F.3d 432 (4th Cir. 2004). See Carilion Clinic, 2013 WL
239051, at *3 n.2. But our holding in that case does not apply here
because "in Washington Square, the investors were concededly customers
of an associated person" of the member firm, id., thus establishing the
existence of an arbitration agreement and permitting application of the
presumption in favor of arbitration.
          RAYMOND JAMES FINANCIAL SERVICES v. CARY             9
Keough. In Carilion Clinic, we held that a party seeking arbi-
tration was a "customer" under Rule 12200 because that party
had formally contracted with two FINRA members for invest-
ment banking services and paid the members directly for
those services. 2013 WL 239051, at *6. Here, by contrast, it
is undisputed that appellants did not purchase Inofin securities
from RJFS, did not have any accounts at RJFS, and did not
have any personal contact with Keough regarding Inofin.
Moreover, there is no evidence of any contractual relationship
between appellants and RJFS regarding the Inofin transac-
tions, nor is there evidence that appellants ever tendered any
funds to RJFS in connection with those transactions. Unlike
the party seeking arbitration in Carilion Clinic, appellants
here have not demonstrated that they purchased any service or
commodity from a FINRA member that the member sold in
its course of business. Thus, appellants fall outside the scope
of the term "customer." See Morgan Keegan, 2013 WL
425556, at *4.

   Lacking a direct connection to RJFS itself, appellants argue
that they have an indirect customer relationship to the firm by
virtue of their interactions with Affeldt. As the parties’ stipu-
lations indicate, between 2006 and 2008, Affeldt "personally
met with each of the [appellants] and recommended each
invest in Inofin." J.A. 84. All of them did so, and Affeldt and
Keough both received commissions from Inofin for the refer-
rals. Appellants’ claim to RJFS customer status hinges on
their argument that Affeldt was an agent for Keough, such
that when appellants were doing business with Affeldt, they
were actually doing business with Keough—and by extension
with RJFS.

   However, as the district court correctly concluded, the
arguable connection between appellants and RJFS via Affeldt
and Keough is much too attenuated to make appellants cus-
tomers of RJFS within the meaning of FINRA Rule 12200. In
Morgan Keegan, we recently held that a FINRA member that
issued mutual funds was not required to arbitrate claims made
10           RAYMOND JAMES FINANCIAL SERVICES v. CARY
by investors who purchased their mutual fund shares on the
secondary market through a third-party brokerage firm rather
than through or from the issuing FINRA member. 2013 WL
425556, at *4-5. We rejected the investors’ claims that mere
interaction between a member firm and a third party can
transform an investor who dealt only with the third party into
a customer of the member firm. Id. In accordance with that
holding, we conclude that Affeldt’s connection to Keough
does not "transform" appellants into customers of Keough or
RJFS. Appellants made their purchases directly from Inofin,
on the advice of Affeldt, and made no purchases from or
through RJFS or Keough. Affeldt had no actual authority
from RJFS to sell or recommend securities on the firm’s
behalf, nor did he have apparent authority to do so.2

   The parties’ stipulations demonstrate the absence of appar-
ent authority. See Restatement (Second) of Agency § 27
(explaining that apparent authority is created by "written or
spoken words or any other conduct of the principal which,
reasonably interpreted, causes [a] third person to believe that
the principal consents to have the act done on his behalf by
the person purporting to act for him"). It is undisputed that
appellants "had no personal contact with Kevin Keough
regarding Inofin," "did not understand that they were purchas-
ing Inofin or any other security from Raymond James," and
"did not understand they were purchasing Inofin from an
agent whom they believed to be authorized to act on behalf
of Raymond James." J.A. 84-85. The parties further agree that
Affeldt "did not tell any of the [appellants] that he was acting
for a person who claimed to be a representative" of RJFS. J.A.
84. That Keough and Affeldt shared commissions and both
recruited investors on behalf of Inofin does not save appel-
lants’ argument in light of our conclusion that a customer is
  2
    Any question as to whether RJFS failed to adequately supervise
Keough and is thus potentially liable for his arguably unauthorized activi-
ties goes to the merits of appellants’ claims, not to the arbitrability of those
claims. Therefore, we do not address the matter here.
          RAYMOND JAMES FINANCIAL SERVICES v. CARY           11
one "who purchases commodities or services from a FINRA
member." Morgan Keegan, 2013 WL 425556, at *4 (emphasis
added). Appellants dealt only with Inofin and Affeldt, and
appellants are thus not customers of RJFS.

                              III.

   Arbitration is a favored mechanism of dispute resolution
precisely because it helps parties to control legal risk in a
more predictable and less capricious fashion. See Stolt-
Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758,
1774 (2010). When parties have agreed to arbitrate, courts
enforce those agreements vigorously to protect the parties’
justified expectations concerning their choice of dispute reso-
lution mechanisms and their potential exposure to liability. Id.
at 1774-75.

   By agreeing to FINRA Rule 12200, RJFS consented to
arbitration with its customers, not with non-customers such as
appellants. To repeat, the investors here never purchased any
service or commodity from RJFS during the course of its
business activities. To compel RJFS to arbitrate when the firm
has not agreed to do so would be to engage in naked coercion
independent of any sound basis in law. This in turn would
undermine the longstanding principle that arbitration is a
consent-based process through which parties can decide for
themselves where and how to resolve a specific set of poten-
tial disputes. See Volt, 489 U.S. at 479. Moreover, compelling
arbitration when parties have not agreed to do so would dis-
courage entities from agreeing to arbitrate at all out of fear
that such agreements would be stretched too far in the course
of judicial construction. This in itself would undermine the
federal policy favoring arbitration.

   In finding that appellants are not customers of RJFS within
the meaning of Rule 12200, we express no view on the merits
of the allegations that appellants detail in their FINRA State-
ment of Claim. The understandable frustration of investors at
12        RAYMOND JAMES FINANCIAL SERVICES v. CARY
fraudulent sales of securities does not liberate courts from
their sworn fealty to text, in this case the terms of the arbitra-
tion agreement itself. We hold only that RJFS never agreed or
consented to arbitrate disputes with the appellants in this case.
The judgment of the district court is therefore affirmed.

                                                    AFFIRMED
