Lines brothers win appeal against British Columbia cease trading order

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LOM founders Scott and Brian Lines have won an appeal against a Canadian regulator’s cease trading order against them personally. The order had arisen from a 2010 US judgment the brothers consented to following their agreement with the US Securities and Exchange Commission to be subject to sanctions.

But on Friday the Court of Appeal of British Columbia decided in the Lines’ favour, and overturned the order by the British Columbia Securities Commission and its director.

In its decision, the BC court said it may be true that a person who contravenes securities laws in one jurisdiction might do so in another: “But the (BCSC) Director’s argument ignores the fact that in this case, there was no determination by any court or regulatory authority that the Lines had in fact broken any such laws. Nor did the Lines admit to doing so.

“Essentially, then, the Commission made the leap in logic from the fact that the Lines had consented to certain sanctions without admitting wrongdoing, to the conclusion that the public interest required that they be prohibited from trading in all securities in British Columbia.

“Bearing in mind that the standard of reasonableness is concerned with ‘the existence of justification, transparency and intelligibility within the decision making process’ (Dunsmuir, para. 47), I am constrained to the conclusion that the Commission’s order was unreasonable. Essentially, it imposes a severe sanction on each of the Lines for entering into a settlement agreement in which no wrongdoing was admitted. The evidence relied on did not, and could not, justify the more onerous order.”

Responding yesterday to the decision, Mr Lines, who is president of LOM, said: “In its decision, the Court agreed with my assessment that the BCSC failed to understand the meaning and context of the settlement that I and certain LOM entities entered into in October 2010, when we settled a civil suit with the SEC, stemming from transactions occurring 10 years ago.

“ LOM and I settled only in regard to charges of alleged negligence (and not intentional or reckless conduct).

“There was no trial, no admission or finding of wrongdoing or liability, and no adjudication or finding of fact by any court. And although the final ‘neither admit nor deny’ settlement is in the form of a judgment, this was by way of our consent and simply means the judge approved the settlement that was mutually agreed between the parties. The matter was fully resolved as a result.”

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