Synchronized trades under FUTP Regulations require proof of price manipulation; absent that, broker misconduct fails.

Synchronized and cross trades are not per se unlawful under the FUTP framework; liability arises only where the trades are shown to have been entered into with a view to manipulate the price. Here, the nexus allegation with Ketan Parekh entities was dropped for want of proof, and the remaining trades were at prevailing market prices, resulted in delivery, were spread over time, and were not shown to have manipulated the scrip price. As the alleged misconduct was not established, the related charge of failure to exercise due skill and care under the stock-broker code of conduct also could not stand. The impugned order was therefore unsustainable against the appellant.

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Issues: (i) Whether the appellant was guilty of violating the FUTP Regulations and the stock-broker code of conduct by executing synchronized trades and cross trades on behalf of clients.

Analysis: The charge of nexus with the Ketan Parekh entities was dropped for want of proof. On the remaining allegation, the trades were executed at the prevailing market price, resulted in delivery, were spread over a period of time, and there was no allegation that the transactions were intended to or did in fact manipulate the price of the scrip. Synchronized trades are not per se unlawful; they attract the FUTP Regulations only when entered into with a view to manipulate price. Since the alleged misconduct was not established, the allied allegation of failure to exercise due skill and care under the stock-broker code of conduct also could not survive.

Conclusion: The appellant was not guilty of violating Regulation 4(b) or 4(d) of the FUTP Regulations, and the charge under Clause A(3) of the stock-broker code of conduct also failed; the impugned order was therefore unsustainable in favour of the appellant.

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