Self trades through proprietary trading arrangements were treated as fraudulent market conduct, and the penalty was upheld.

Self trades executed through multiple terminals and jobbers on a broker's proprietary account can amount to fraudulent and unfair trade practices because they create artificial volume and a misleading market impression. The fact that only a small percentage of trades matched did not negate the fraudulent character of the arrangement, and the broker remained responsible for ensuring that its business model complied with the securities regulatory framework. The penalty was upheld as neither unreasonable nor disproportionate, given the nature of the misconduct and that it remained well below the statutory maximum. The impugned order was sustained and both appeals were dismissed.

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Issues: (i) Whether the appellant's trades executed through multiple terminals and jobbers on its proprietary account amounted to self trades and violated the prohibitions on fraudulent and unfair trade practices and the stock-broker code of conduct; (ii) Whether the penalty imposed was unreasonable or disproportionate to the nature of the violation.

Issue (i): Whether the appellant's trades executed through multiple terminals and jobbers on its proprietary account amounted to self trades and violated the prohibitions on fraudulent and unfair trade practices and the stock-broker code of conduct.

Analysis: The trades were not in dispute. The arrangement adopted by the appellant, operating through multiple jobbers from different locations, resulted in buy and sell orders matching on the same proprietary account, thereby producing self trades. Such trades create artificial volume in the scrip and convey a misleading impression to market participants. The fact that the percentage of matched trades was relatively small did not remove the fraudulent character of the transactions, and the appellant was required to ensure that its chosen business model conformed to the regulatory framework.

Conclusion: The appellant was rightly held to have violated the relevant FUTP regulations and the stock-broker code of conduct.

Issue (ii): Whether the penalty imposed was unreasonable or disproportionate to the nature of the violation.

Analysis: The misconduct involved fictitious self trades by a stock broker, a matter viewed seriously because it affects market integrity and creates artificial volume. The penalties imposed were substantially below the statutory maxima and were considered in the light of the admitted trading pattern and the regulatory breach found against the appellant.

Conclusion: The penalty was neither unreasonable nor disproportionate.

Final Conclusion: The impugned order was sustained and both appeals were dismissed.

Ratio Decidendi: Self trades executed through an arrangement that causes matching buy and sell orders on the same proprietary account constitute fraudulent market conduct, and a broker remains responsible to structure its trading operations in compliance with the securities regulatory framework.

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