Petitioner-appellant, Fahnestock & Co., Inc. (“Fahnestock”) appeals from a judgment entered in the United States District Court for the Southern District of New York (Leisure, J.) confirming the compensatory damages portion of an arbitration award in favor of its former employee, Joseph J. Waltman. Waltman cross-appeals from the same judgment insofar as it vacates the punitive damages portion of the arbitration award.

[*514] On appeal, Fahnestock contends that the district court erred by denying its petition to vacate the entire defamation award because the members of the arbitration panel (“Arbitrators”) exceeded their authority and manifestly disregarded the applicable law. Fahnestock argues that its filing of an amended Form U-5, a termination notice form that the National Association of Securities Dealers (“NASD”) requires stock brokerage firms to file when they dismiss an employee, was absolutely privileged and could not serve as a basis for an award for defamation. On cross-appeal, Waltman argues that the court erred in vacating the Arbitrators’ award for punitive damages because federal substantive law, as opposed to the New York law applied by the district court, permits such an award in arbitration proceedings brought pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16 (1988). For the reasons that follow, we affirm the judgment of the district court.

BACKGROUND

The arbitration proceeding subject of this action arose as a result of the events surrounding the discharge of Waltman from the employ of Fahnestock. Waltman was hired on March 16, 1982 as a “registered representative to head Fahnestock’s Retirement Trust Division” and “to manage and build Fahnestock’s insurance products business.” During the course of his employment, in addition to overseeing Fahnes-tock’s Retirement Division, Waltman acted as an insurance sub-licensee for Fahnes-tock. In addition, he established a general insurance agency in Pennsylvania for the purpose of marketing insurance and annuity products for Fahnestock in Pennsylvania and other states. Waltman was discharged on December 12, 1988 when Fahnestock closed down its Retirement Trust Division.

When Waltman was terminated, Fahnes-tock filed a Form U-5 termination notice with the NASD, indicating that the discharge was occasioned by “business consolidation.” When Fahnestock later was unable to locate some insurance files that it believed were maintained by Waltman, it contacted Waltman and requested that he return the files. Waltman refused to return the files, claiming that they belonged to his general insurance agency. Waltman explained that he would turn over the files only if Fahnestock obtained a release and indemnification from each registered agent named in the files.

Instead of complying with Waltman’s request, Fahnestock filed a Statement of Claim with the Director of Arbitration of the New York Stock Exchange (“NYSE”), requesting the following relief: return of the original files, damages and costs, and other expenses. Fahnestock then filed an amended Form U-5. On the amended form, Fahnestock changed its previous answer in response to the question about whether the employee was under “internal review for fraud or wrongful taking of property, or violating investment-related statutes, regulations, rules or industry standards of conduct,” from a “NO” to a “YES.”

Waltman filed an answer in the NYSE arbitration, denying the allegations that he wrongfully took Fahnestock’s property. He also filed a counterclaim, in which he alleged that Fahnestock and three of its officers, the chairman of the board, the president, and the general counsel, defamed him by filing the amended Form U-5.

During the course of eight hearings, the Arbitrators heard testimony concerning the chairman’s threats to arrest Waltman for his failure to return the files, the chairman’s instruction to refile the Form U-5 “in such a way as to indicate that [Walt-man] had been fired for cause and noting that he had stolen property from Fahnes-tock,” and the threats made to Waltman’s current employer in an attempt to pressure Waltman into abandoning his defamation action. The Arbitrators awarded Waltman $56,000 in compensatory damages for wrongful discharge, $14,700 in legal fees, $100,000 for defamation and $100,000 in punitive damages. Liability was imposed on Fahnestock alone, and the claims against the individual officers were dismissed.

[*515] Waltman filed a petition to confirm the arbitral award under NYSE Arbitration rule 628(a) in the Eastern District of Pennsylvania. On March 15, 1990, Fahnestock filed a petition in the Southern District of New York to vacate the arbitral award under the Federal Arbitration Act, 9 U.S.C. § 10(d), claiming that the Arbitrators exceeded their authority by granting an award for defamation and by awarding punitive damages. No other challenges to the award were made. Federal jurisdiction was based on the diversity of the parties, as Fahnestock’s principal place of business was New York and Waltman resided in Pennsylvania. The Eastern District of Pennsylvania court stayed the petition to confirm the arbitral award pending the outcome of the New York action to vacate it.

On August 22, 1990, the district court denied Fahnestock’s petition to vacate the compensatory damages portion of the arbi-tral award for defamation, but granted its petition to vacate the punitive damages portion of the award. The court rejected Fahnestock’s claim that statements made in the amended Form U-5 were absolutely privileged. Instead, it found only a qualified privilege, which could be overcome upon a showing of malice or lack of probable cause for the statement. Holding that a finding of malice or probable cause was a factual matter and, as such, could be reviewed by the courts only on a limited basis, the court found that the Arbitrators did not exceed their powers in rendering the compensatory defamation award.

With respect to the punitive damages portion of the arbitral award, the district court, relying on Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 353 N.E.2d 793, 386 N.Y.S.2d 831 (1976), held that the Arbitrators were prohibited from awarding punitive damages. In response to Fahnestock’s contention that federal substantive law governs arbitrations conducted pursuant to the Federal Arbitration Act, the court held that “the state substantive law as set forth in Garrity v. Lyle Stuart, Inc. regarding the inability of arbitrators to award punitive damages, is not in direct conflict with any express provision of the Federal Arbitration Act,” and therefore the application of Garrity would not violate the supremacy clause of the United States Constitution.

DISCUSSION

I. Compensatory Award

An arbitration award may be vacated “[w]here the arbitrators exceeded their powers,” 9 U.S.C. § 10(d), or where the arbitrators acted in “manifest disregard of the law.” Carte Blanche (Singapore) Pte., Ltd. v. Carte Blanche Int’l, Ltd., 888 F.2d 260, 265 (2d Cir.1989); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933-34 (2d Cir.1986); Siegel v. Titan Indus. Corp., 779 F.2d 891, 892 (2d Cir.1985) (per curiam). Fahnestock asserts that the Arbitrators exceeded their powers and manifestly disregarded the law in granting an award for defamation based on its filing of the amended Form U-5. Fahnestock argues that, because it was required by law to file the form, the filing was subject to an absolute privilege. Therefore, it urges that the filing of the Form U-5 could not serve as a basis for an award for defamation. Fahnestock’s arguments are without merit.

We have consistently accorded the narrowest reading to section 10(d), “especially when it ‘has been invoked in the context of the arbitrators’ alleged failure to correctly decide a question which all concede to have been properly submitted in the first instance.’ ” Synergy Gas Co. v. Sasso, 853 F.2d 59, 63 (2d Cir.) (citation omitted), cert. denied, 488 U.S. 994, 109 S.Ct. 559, 102 L.Ed.2d 585 (1988). Consequently, we have recognized that if arbitrators “rule[] on issues not presented to [them] by the parties, [they have] exceeded [their] authority and the award must be vacated.” Dighello v. Busconi, 673 F.Supp. 85, 87 (D.Conn.1987), aff'd mem., 849 F.2d 1467 (2d Cir.1988); see Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G., 579 F.2d 691, 703 (2d Cir.1978). Here, it is uncontested that the ruling of the Arbitrators was confined to the issues presented by the parties. Moreover, we have recognized that defamation claims based on statements in a Form U-5 are arbitrable.[*516] See Fleck v. E.F. Hutton Group, Inc., 891 F.2d 1047, 1049, 1053 (2d Cir.1989). Therefore, any argument that it is beyond the power of arbitrators to decide these types of claims is contrary to the law of this circuit.

Nor are we persuaded that the Arbitrators manifestly disregarded the law in awarding Waltman damages for defamation. Judicial inquiry under the manifest disregard standard likewise is extremely limited. Bobker, 808 F.2d at 933-34. We have held that there must be “ ‘something beyond and different from a mere error in the law or failure on the part of the arbitrators to understand or apply the law,’ ” Siegel, 779 F.2d at 892 (citation omitted), in order to sustain a finding of manifest disregard of the law. Illustrative of the degree of “disregard” necessary to support vacatur under this standard is our holding that manifest disregard will be found where an “arbitrator ‘understood and correctly stated the law but proceeded to ignore it.’ ” Id. at 893 (citation omitted).

Under New York law, “[a] communication is said to be qualifiedly privileged where it ‘is fairly made by a person in the discharge of some public or private duty, legal or moral, or in the conduct of his own affairs, in a matter where his interest is concerned.’ ” Toker v. Pollak, 44 N.Y.2d 211, 219, 376 N.E.2d 163, 166, 405 N.Y.S.2d 1, 5 (1978); see also Mihlovan v. Grozavu, 72 N.Y.2d 506, 509, 531 N.E.2d 288, 289, 534 N.Y.S.2d 656, 657 (1988) (per curiam); Shapiro v. Health Ins. Plan of Greater New York, 7 N.Y.2d 56, 60, 163 N.E.2d 333, 336, 194 N.Y.S.2d 509, 512-13 (1959). The qualified privilege, however, can be vitiated upon a showing that the communication was made with actual malice. Park Knoll Assocs. v. Schmidt, 59 N.Y.2d 205, 211, 451 N.E.2d 182, 185, 464 N.Y.S.2d 424, 427 (1983); see also Mihlovan, 72 N.Y.2d at 509, 531 N.E.2d at 289, 534 N.Y.S.2d at 657-58. Actual malice has been defined as “ ‘personal spite or ill will, or culpable recklessness or negligence.’ ” Garson v. Hendlin, 141 A.D.2d 55, 64, 532 N.Y.S.2d 776, 782 (2d Dep’t 1988) (citation omitted).

At the arbitration hearings, the Arbitrators heard testimony that the chairman of Fahnestock gave instructions to refile the Form U-5 “in such a way as to indicate that [Waltman] had been fired for cause and ... that he had stolen property from Fahnestock.” Fahnestock’s former managing director testified that the amended Form U-5 was filed at the command of Fahnestock’s chairman for the specific purpose of damaging Waltman’s reputation rather than for a regulatory purpose. Additionally, evidence was introduced that Fahnestock attempted to force Waltman to drop his counterclaim by threatening his current employer.

Here, the Arbitrators never indicated the reasons for the defamation award. However, it is axiomatic that arbitrators need not disclose the rationale for their award. United Steelworkers of Am. v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598, 80 S.Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960); Koch Oil, S.A. v. Transocean Gulf Oil Co., 751 F.2d 551, 554 (2d Cir.1985). “[I]f a ground for the arbitrator’s decision can be inferred from the facts of the case, the award should be confirmed.” Sobel v. Hertz, Warner & Co., 469 F.2d 1211, 1216 (2d Cir.1972); see Siegel, 779 F.2d at 894. Therefore, even though Fahnestock was protected by the qualified privilege in filing the amended form, based on the evidence, the arbitrators acted well within the bounds of their broad authority in making an award of compensatory damages in favor of Waltman. See In re Marine Pollution Serv., Inc., 857 F.2d 91, 94 (2d Cir.1988) (any “colorable justification” will support an arbitral award); Andros Compa-ñía, 579 F.2d at 704. The ample evidence of Fahnestock’s flagrantly spiteful conduct, demonstrating its intent simply to injure Waltman’s reputation, presented the Arbitrators with sufficient grounds to find that no qualified privilege attached to Fah-nestock’s filing of the amended form. See Garson, 141 A.D.2d at 65, 532 N.Y.S.2d at 782. It is apparent that the Arbitrators declined to extend the doctrine of absolute immunity to statements made to the NASD, a quasi-official body. Cf. Toker, 44 N.Y.2d at 222-23, 376 N.E.2d at 168-69,[*517] 405 N.Y.S.2d at 7; Garson, 141 A.D.2d at 59-60, 532 N.Y.S.2d at 779. Therefore, under these circumstances, we agree with the district court that the Arbitrators’ compensatory defamation award in favor of Waltman should be confirmed.

II. Punitive Damages Award

On cross-appeal, Waltman argues that the district court erred in vacating the punitive damages portion of the Arbitrators’ award. The district court perceived that the governing rule was established by the New York Court of Appeals: “An arbitrator has no power to award punitive damages, even if agreed upon by the parties.” Garrity, 40 N.Y.2d at 356, 353 N.E.2d at 795, 386 N.Y.S.2d at 832. The Garrity rule is bottomed on policy considerations deemed controlling by New York’s highest court: “[Enforcement of an [arbitrator’s] award of punitive damages as a purely private remedy would violate strong public policy.” Id. The rule maintains its vitality in the courts of New York. See, e.g., Diker v. Cathray Constr. Corp., 158 A.D.2d 657, 658, 552 N.Y.S.2d 37, 38 (2d Dep’t 1990); Belco Petroleum Corp. v. AIG Oil Rig, Inc., 164 A.D.2d 583, 591, 565 N.Y. S.2d 776, 784 (1st Dep’t 1991).

Waltman’s challenge to the district court judgment is premised on the federal substantive law of arbitrability: “Section 2 [of the FAA, 9 U.S.C. § 2,] is a congressional declaration of a liberal federal policy favoring arbitration agreements.... The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). Since the agreement between the parties falls within the coverage of the FAA, allows for the arbitration of any dispute between them and includes no restriction on the award of punitive damages under the governing rules of the New York Stock Exchange, Waltman urges that there should be no bar to the award of punitive damages under federal substantive arbitration law. Indeed, there is precedent for Waltman’s position that federal law and policy confers upon FAA arbitrators the right to award punitive damages even where, as is not the case here, the arbitration parties agree that New York law is to govern. See, e.g., Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378, 1386-88 (11th Cir.1988); Barbier v. Shearson Lehman Hutton, Inc., 752 F.Supp. 151 (S.D.N.Y.1990); Singer v. E.F. Hutton & Co., 699 F.Supp. 276 (S.D.Fla.1988); Duggal Int’l Inc. v. Sallmetal, B.V., No. 84 Civ. 7170 (JMC) (S.D.N.Y. May 8, 1986). Our view is somewhat different.

While it is true that in enacting the FAA, “Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements,” Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 861, 79 L.Ed.2d 1 (1984), it also is true that “[t]he FAA contains no express preemptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration,” Volt Info. Sciences v. Board of Trustees of the Leland Stanford Jr. Univ., 489 U.S. 468, 477, 109 S.Ct. 1248, 1254, 103 L.Ed.2d 488 (1989). Accordingly, state law may be applied in arbitration matters, subject to preemption only “to the extent that it actually conflicts with federal law.” Id.; see also Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941) (preemption is found in cases where state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”). We find no conflict between the provisions of the FAA and the Garrity rule.

What the FAA requires is that parties comply with their agreements to arbitrate. “ ‘[Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ ” AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986) (citation omitted); see also New York News Inc. v. Newspaper Guild of New York, 927 F.2d 82, 84 (2d Cir.1991); Necchi v. Necchi Sewing Mach. Sales Corp., 348 F.2d 693, 696 (2d Cir.1965), cert. denied, 383 U.S. 909, 86 S.Ct. 892, 15 L.Ed.2d 664 (1966). Walt-[*518] man’s defamation claim certainly was a matter for arbitration pursuant to the agreement of the parties, but there was no agreement as to whether punitive damages were allowable. If the parties had agreed to permit the arbitrators to make such an award, federal arbitration law might require confirmation, for “parties are generally free to structure their arbitration agreements as they see fit,” and the FAA provides for enforcement of the terms of such privately negotiated agreements. Volt Information Sciences, 489 U.S. at 478-79, 109 S.Ct. at 1255-56. The body of preemptive federal substantive law that supports the FAA has developed largely in response to state laws that restrict arbitration in derogation of agreements freely negotiated. See, e.g., Perry v. Thomas, 482 U.S. 483, 489-90, 107 S.Ct. 2520, 2525-26, 96 L.Ed.2d 426 (1987). The FAA itself was designed “to make arbitration agreements as enforceable as other contracts,” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 1806 n. 12, 18 L.Ed.2d 1270 (1967) and “to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate,” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-20, 105 S.Ct. 1238, 1241-42, 84 L.Ed.2d 158 (1985). The federal substantive law of arbitration assures the accomplishment of these purposes.

Why should state law be applied in this case, where the parties have not specified remedies and where the arbitrators therefore should be free to fashion appropriate relief? The answer lies in the jurisdictional basis of the action giving rise to this appeal. While the FAA “creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate, ... it does not create any independent federal question jurisdiction _” Moses H. Cone, 460 U.S. at 25 n. 32, 103 S.Ct. at 942 n. 32. Some independent basis for federal jurisdiction must be established. The petition in the case at bar has invoked the diversity of citizenship of the parties as a means of acquiring subject matter jurisdiction. 28 U.S.C. § 1332. The award of the arbitrators was before the district court in this diversity case for review under state law. As previously noted, state law relating to the propriety of a punitive damages award by arbitrators in the absence of an agreement on the subject is not preempted by any federal substantive law bearing on the subject.

Ordinarily, “[i]n a diversity action, or in any other lawsuit where state law provides the basis of decision, the propriety of an award of punitive damages for the conduct in question ... [is a] question[ ] of state law.” Browning-Ferris Indus. v. Kelco Disposal, Inc., 492 U.S. 257, 278, 109 S.Ct. 2909, 2922, 106 L.Ed.2d 219 (1989). The measure of damages in general is a matter controlled by New York substantive law where federal jurisdiction in New York is predicated on the diversity of the parties. See Shu-Tao Lin v. McDonnell Douglas Corp., 742 F.2d 45, 49 n. 5. (2d Cir.1984); Van Gemert v. Boeing Co., 553 F.2d 812, 813 (2d Cir.1977). It follows that in this action the Garrity rule prohibiting the award of punitive damages by arbitration must be applied. That the rule is grounded in state policy concerns renders it no less a rule of substantive law. See Stewart, Punitive Damages Arbitration: Fish or Cut Bait, N.Y.L.J., Feb. 21, 1991, at 5, col. 1.

We emphasize that an agreement between the parties specifically to award punitive damages may well have dictated a different outcome. The Garrity rule, to the extent that it purports to prevent arbitrators from awarding punitive damages in the face of such an agreement, seems to invoke preemption concerns, since it runs afoul of the federal substantive law rules that sweep aside any state attempt to interfere with the agreement of the parties. The matter may be left for another day, however, because we deal here only with the NYSE provisions for arbitration.

Article XI of the NYSE Constitution provides that “[a]ny controversy between ... a member, allied member or member organization and any other person, arising out of the business of such member ..., shall at the instance of any such party, be submitted for arbitration_” 2 N.Y.S.E. Guide (CCH) ¶ 1501. Additionally, NYSE rule 600(a) provides for the arbitration of[*519] “[a]ny dispute, claim or controversy,” 2 N.Y.S.E. Guide (CCH) 11 2600, and NYSE rule 347 provides for the arbitration of “any controversy ... arising out of the employment or termination of employment ...,” 2 N.Y.S.E. Guide (CCH) 112347.

Despite this broad language, the NYSE provisions are silent with regard to the power of arbitrators to award punitive damages. As the district court observed, unlike the cases involving arbitration agreements incorporating the rules of the American Arbitration Association (“AAA”), which provide that arbitrators may award “any remedy or relief which [is] just and equitable and within the scope of the agreement,” see Bonar, 835 F.2d at 1386 (upholding AAA award of punitive damages); Raytheon Co. v. Automated Business Sys., Inc., 882 F.2d 6, 9 (1st Cir.1989) (same), the NYSE rules have no provisions relating to remedy or relief. Clearly, if the NYSE wanted to empower arbitrators to award punitive damages, it could have done so. See Friedman, Punitive Damages in Securities Cases, N.Y.L.J., May 2, 1991, at 3, col. 1.

Waltman points to the award form, which is used by NYSE arbitrators to memorialize the arbitral awards and allows for entry of a punitive damages award under a specific heading marked “punitive damages,” to support his contention that NYSE arbitrators are empowered to award punitive damages. We cannot conclude that award forms are part of the arbitration agreement. Moreover, NYSE arbitra-tions occur throughout the nation, and our holding here does not mean that in those states in which arbitral punitive damages awards are permitted, arbitrators may not appropriately utilize the punitive damages section of the award form.

In a recent decision of this Court, the panel in dictum noted that “in an appropriate case, the arbitrators could enhance [an award] by punitive damages if prior misconduct established entitlement to such damages.” Kerr-McGee Refining Gory. v. M/T Triumph, 924 F.2d 467, 470 (2d Cir.1991) (citing Bonar, 835 F.2d at 1387). In Kerr-McGee, the plaintiff was awarded treble damages under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. §§ 1961-1968, in an arbitration proceeding. 924 F.2d at 469-70. Kerr-McGee, however, was not a diversity case requiring a preemption analysis, since RICO there provided federal question jurisdiction under 28 U.S.C. § 1331.

Although “[w]e have consistently accorded the narrowest of readings to the Arbitration Act’s authorization to vacate awards,” Andros Compania, 579 F.2d at 703, we also have noted that under Garrity an arbitral award of punitive damages must be vacated in an appropriate case. See John T. Brady & Co. v. Form-Eze Sys., Inc., 623 F.2d 261, 263 (2d Cir.) (“ ‘where the damages are genuinely intended to be punitive[,] ... the courts [should] vacate the award’ ” (citation omitted)), cert. denied, 449 U.S. 1062, 101 S.Ct. 786, 66 L.Ed.2d 605 (1980); see also Synergy Gas Co. v. Sasso, 853 F.2d 59, 65-66 (2d Cir.) (dicta), cert. denied, 488 U.S. 994, 109 S.Ct. 559, 102 L.Ed.2d 585 (1988). For the reasons given, this is an appropriate case under the provisions of section 10(d) of the FAA for vacatur of the punitive damages award.

CONCLUSION

The judgment of the district court is affirmed in all respects.