The self-regulatory body for Canada?s securities industry has accused a Canadian stockbroker of secretly trading the over-the-counter bulletin board listed security HiEnergy Technologies Inc. on behalf of American fraudster Phil Gurian.

The Canadian action stems out of a three-year-old American probe which saw the US Securities and Exchange Commission subpoena Bermuda-based investment firm Lines Overseas Management for documents which would ?assist in establishing whether Gurian or related persons or entities profited from Gurian?s fraudulent undisclosed control of HiEnergy by selling its stock through LOM, and whether any person or entity, including possibly Gurian or LOM, manipulated HiEnergy stock,? the SEC said.

In legal documents filed in 2004, the SEC pointed to SEC staff information that ?LOM has established accounts in its name with at least five United States broker-dealers (Knight Securities, Paragon Capital Markets, Wien Securities Corp., Philip Louis Trading, and Vfinance Investments)? which ?traded in HiEnergy stock.?

LOM responded that it ?executed transactions in HiEnergy on behalf of 21 accounts. No transactions were executed on behalf of LOM, and principals of LOM bought and sold only 20,000 shares for a net profit of $3,913.?

The company continued: ?LOM has found no evidence of any improper trading through LOM accounts, and we have found no evidence whatsoever that Gurian or his associates have any connection to any accounts at LOM. LOM has advised both the BMA and the SEC that Gurian and his associates do not have accounts with LOM, or any relationships with any LOM employees.?

That same year, the SEC turned to the courts for assistance in enforcing the HiEnergy subpoenas as well as other subpoenas served on LOM that relate to a separate probe of trading of Sedona Software Solutions. While it continues to seek court enforcement of the Sedona subpoenas, late last year the SEC withdrew its application related to HiEnergy on the grounds that it no longer needed information from LOM ?based on recent developments unrelated to this action.?

The SEC has given no further explanation on those developments however the Investment Dealers Association of Canada said in a hearing notice issued on Friday that it began investigating Robertson Roger Dow?s trading of HiEnergy after being alerted to the SEC probe of trading in that security.

The allegations have not been proven, but the IDA alleges that between 2002-2004, Mr. Dow, a former broker at Toronto?s Octagon Capital Corporation, accepted orders to trade from Mr. Gurian ?who he knew or ought to have known to have had a history of securities violations and or an association with organised crime,? the IDA alleged in its hearing notice.

Mr. Gurian pleaded guilty in 2000 to US federal criminal charges including mail fraud and conspiracy to commit securities fraud, mail fraud and wire fraud. A grand jury indictment in 1999 alleged that Mr. Gurian and others including people tied to organised crime of orchestrating a series of ?pump and dump? schemes involving microcap issuers. He was banned from the American securities industry in the early 1990?s, the IDA said.

Since trading rules prevented Mr. Dow from opening accounts or accepting trades from US residents, the IDA asserted in its statement of allegations that Mr. Dow concealed the trading from his supervisors at Octagon Capital by opening various accounts in the sole name of Jeanne Schnapik, who is Mr. Gurian?s mother and a resident of the Ontario and Florida. The account opening information suggests that her common law spouse Rheal Cote also had authority to give trading instructions on her behalf, according to the IDA statement of allegations.

Two months after he started doing business with Mr. Gurian, Mr. Dow told the IDA that he learned about Mr. Gurian?s background and even read media articles which tied Mr. Gurian to Phil Abramo, a captain in the Decavalcante organised crime family. However, Mr. Dow told the IDA that he came to know Mr. Gurian and felt he was ?an honourable man? in relation to the transactions they did together.

While Mr. Dow told the IDA that his trading with Mr. Gurian was mostly short selling liquid bulletin board stocks through market makers in the US, he admitted that Mr. Gurian directed him in making a market for HiEnergy.

He said that Mr. Gurian never discussed his strategy and also set the prices and amounts to be traded for Hi-energy shares.

The IDA also accuses Mr. Dow of intentionally concealing from Octagon that he was taking trading instruction on six Benil accounts that he opened at Octagon from individuals who were neither named as trading authorities nor permitted to trade given their US citizenship.

In its own investigation, the SEC alleged that Benil Finance Ltd. was Mr. Gurian?s ?alter ego? through which he secretly controlled and manipulated the stock of HiEnergy.

The IDA said that while Gurian did not open any accounts at Octagon nor was he listed as either a beneficial owner or as having trading authority over any of the Benil accounts, Mr. Dow told the IDA that he presumed that Ms. Schnapik the beneficial owner of the accounts ? knew Gurian was actually directing trading in the account.

Mr. Dow stopped working at Octagon last year. His hearing before the IDA is scheduled for February 28.