Lines Overseas Management (LOM) is set to face charges of security fraud filed by the United States' Security Exchange Commission.

The SEC filed a civil injunctive action in the US District Court for the Southern District of New York against brothers Scott Lines, the firm's chief executive officer, and former president Brian Lines, along with Lines Overseas Management, LOM (Holdings), LOM Capital, LOM Securities (Bermuda), LOM Securities (Cayman) and LOM Securities (Bahamas).

It is alleged that all of the parties took part in two fraudulent schemes to manipulate the stock prices of microcap companies Sedona Software Solutions and SHEP Technologies.

LOM said yesterday that it intends to contest the charges, claiming it will prove that not only are the SEC's charges "legally and factually unsound", but they are also part of a "longstanding pattern of harassment against LOM and its officers".

The main allegations centre around LOM and the related parties receiving "illegal proceeds" totalling around $5.8 million from two stock manipulation schemes involving companies, namely Sedona and SHEP, according to the SEC.

However, the offshore financial services group says it will show that the SEC has acted improperly by failing to correct a "number of materially false statements" made in court filings, despite being provided with evidence to the contrary by LOM.

LOM's chief financial officer Malcolm Moseley said: "It is unthinkable that the SEC would ever treat a US-based broker-dealer the way it has treated LOM.

"The SEC has targeted LOM despite our efforts to uphold the highest standards of responsible corporate citizenship and compliance.

"LOM welcomes the opportunity to clear its name and to defend itself against the SEC's unmeritorious claims."

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