THE Securities and Futures Commission (SFC) has taken action against Stephil Securities and Infast Futures over malpractice. It prohibited Tsang Chi-ming, trading in the name of Stephil Securities, from being represented in the stock exchange trading hall by Ho Tak-wing, its dealer's representative. It issued a notice prohibiting Infast Futures from engaging John Chan Wai-tung to execute trade or determine how trades were executed. The SFC said it had investigated various nominee accounts established with Stephil Securities, and had found the accounts were used to allow trading malpractices to disadvantage investors from October 1993 to January 1995. The accounts were maintained by a large number of floor traders employed by other stock exchange members in the names of their relatives or friends, the SFC said. Although inquiries were continuing, the SFC said it decided to take prompt action against Stephil, given the way the securities firm conducted business. The SFC said the 'bearer cheque' or cash settlement method employed by the firm would continue to breed malpractice. The SFC specified certain internal control requirements to be adhered to by Stephil in future. The securities house has to establish the beneficial identities of persons on whose behalf accounts are operated, record the particulars of client orders, and maintain a proper audit trail. The stock exchange is also considering taking disciplinary action against Stephil for suspected breaches of its rules. Firm action was taken against Infast Futures Limited (IFL), a member of the Hong Kong Futures Exchange, and its accredited director concerning suspected malpractices. These were believed to have disadvantaged clients in the trading of Hang Seng Futures contracts. Infast Futures was banned from executing any cross trade on the exchange. The SFC said Infast's malpractice involved 'the improper use of cross trades by IFL to allocate favourable prices to its house account and unfavourable prices to its clients'. This happened after IFL executed the order of a client by means of a cross trade, meaning that IFL took the opposite side to the client's order, and when the Hang Seng Index Futures price moved in favour of the client's order 'IFL executed a second cross trade at the then market price and allocated the price of the second cross trade rather than the price of the first cross trade to the client', the SFC statement said. IFL would no longer be allowed to continue executing cross trades on the exchange until compliance systems were enforced.