Synchronized trades and false market appearance led to findings of fraudulent trading, broker misconduct, and regulatory breach.

Synchronized trades executed with prior understanding were found to be non-genuine because they matched in price, quantity and timing, created artificial volumes, and gave a false and misleading appearance of trading. The order held that such conduct disturbed price discovery and fell within fraudulent trade practice prohibitions, while the broker's reliance on the limited number of trades or their on-screen execution did not cure the misconduct. It further found that the broker failed to maintain integrity, fairness and due skill, and did not comply with the negotiated deals circular. Violations of the fraudulent trade practice regulations, the broker code of conduct and the SEBI circular were held to justify major penalty.

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Issues: Whether the broker had indulged in synchronized trades that created a false and misleading appearance of trading, and thereby violated the fraudulent trade practice regulations, the broker code of conduct, and the SEBI circular governing negotiated deals.

Analysis: The broker did not dispute the trades but denied any prior understanding or manipulative intent. The order found, on the basis of the trading pattern, the relationship between the broker, its client and the connected entities, the matching of price, quantity and timing, and the surrounding circumstances, that the trades were executed with prior understanding and were not genuine transactions. It held that the repeated synchronized trades created artificial volumes and a misleading market appearance, disturbed the price discovery mechanism, and were not protected by the plea that the trades were small in number or executed on-screen. The order also concluded that the broker failed to maintain the required standards of integrity, fairness and due skill and did not comply with the SEBI circular on negotiated deals.

Conclusion: The broker was held to have violated Regulation 4(b), 4(c) and 4(d) of the fraudulent trade practices regulations, Clauses A(1) to A(4) of Schedule II of the broker regulations, and the SEBI circular dated 14 September 1999, warranting major penalty.

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