The Ontario Securities Commission today issued a notice of hearing against, and a temporary order restricting the business of, penny stock dealer Arlington Securities Inc. and its only officer Samuel Milne.

Arlington is registered as a securities dealer. Milne is president, compliance officer and a director of Arlington.

The OSC’s allegations recall the cases it brought against three penny stock dealers last summer — they accuse Arlington of trading stock in eight issuers for its own account at excessive markups between 1996 and 2000.

The stocks involved trading on the Canadian Dealing Network Inc. and the Canadian Venture Exchange. Staff of the commission allege that during the material times, in excess of 90% of Arlington’s revenue was earned from principal trading and derived from trading stock of the eight issuers.

It is alleged that Arlington re-sold this stock to its own clients at mark-ups above acquisition costs ranging from approximately 146% to approximately 337%. Staff further allege that during the four year period, gross profit earned from principal trading in stock of the issuers was approximately $13.8 million.

Staff allege that in engaging in this conduct Arlington and Milne failed to deal fairly, honestly and in good faith with their clients and have not acted in the best interest of their clients and otherwise acted contrary to the public interest. It is seeking a trading ban, registration restrictions, director bans, reprimands and costs of the investigation. It has scheduled a hearing for October 24 to consider the case.

Last summer, the OSC wound up three penny stock dealers with similar allegations, that led to trading and registration bans for the principals involved.