The president of Bermuda-based LOM (Holdings) Limited has resigned as a two-and-a-half year-old US Securities and Exchange Commission probe of alleged securities fraud continues to bring negative publicity to his company.

Brian Lines, 42, co-founded the LOM group of companies with brother and managing director Scott Lines, 40, in 1992. Brian Lines has served as president and director for the past 14 years, but last Friday he stepped down from both positions.

His father and current chairman of LOM Donald Lines, 73, has assumed the role of president. The elder Lines is a former president of Bank of Bermuda.

In a statement LOM said: "Mr. Lines' resignation comes after an ongoing US Securities and Exchange Commission investigation for two and half years, which remains unresolved. Mr. Lines advised the Board that he felt his resignation at this time was in the best interest of the company, shareholders, employees and customers, for he hopes this might improve the company's ability to resolve the matter and move forward."

The statement did not elaborate on whether Brian Lines would continue to hold shares in LOM and further queries were not answered by Press time.

His resignation came just one day after the brokerage subsidiaries of the LOM Group began curtailing client activity in the US bulletin board and pink sheet over the counter markets due to regulatory scrutiny and resulting negative publicity. The company had earlier claimed to have spent US$2.75 million over the last two years on legal fees associated with the SEC probe of alleged securities fraud involving bulletin-board listed Sedona Software Solutions Inc. and SHEP Technologies Inc., both of Vancouver, Canada, and HiEnergy Technologies Inc., of Irvine, California.

While the SEC does not normally speak about ongoing investigations, details on this probe became public when the SEC asked the courts to help enforce four subpoenas for information served on Scott Lines last year concerning LOM's "extensive trading in the three securities".

LOM and the Lines brothers deny any wrongdoing, but the SEC maintains that while LOM/Lines initially professed a desire to cooperate with their investigations: "They have refused to provide the SEC with the essential information that would identify the persons (other than the Lines brothers) who directed the suspected fraudulent trades in question. LOM and Lines have withheld documents that would reveal who authorised the trades, who executed the trades, who controlled the accounts and who directed the distribution of the resulting ill-gotten gains. By refusing to testify, [Scott Lines has withheld from the SEC important information concerning the extent of his knowledge and participation in these fraudulent schemes," the SEC said in court documents.

Earlier this year, Magistrate Judge Alan Kay of the US District Court in the District of Columbia ordered LOM and Scott Lines to comply with the subpoenas, however the Bermuda parties have appealed his ruling to District Court Judge Richard W. Roberts on the grounds that the court lacks jurisdiction. They also claim that they have fully cooperated with the SEC through their own regulators however in some cases they have said they would be breaching confidentiality laws in Bermuda, the Bahamas and the Cayman Islands if they turned over client records.

The ruling is pending.