Lawyers for Bermuda-based LOM went before Canada?s British Columbia Securities Commission (BCSC) this week over alleged non-compliance in a securities investigation.

The BCSC panel has reserved its decision involving parent company LOM (Holdings), LOM Securities (Bahamas) Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Cayman) Ltd., Lines Overseas Management, Donald P. Lines, Brian N. Lines, Scott G.S. Lines, Malcolm Moseley, David McNay and J. Scott Hill.

The BCSC panel will consider whether the companies and individuals have contravened its Securities Act, RSBC1996 in relation to its investigation of San Telmo Energy.

It will also determine whether it is in the public interest to order the LOM and its executives to cease trading in and be prohibited from purchasing any securities or exchange contracts in the province.

The panel also must decide whether to order the named individuals to resign positions they hold and prohibit them from becoming or acting as a director or officer of an issuer or engaging in investor relations activities in the province.

BCSC staff involved in the case are also seeking an indication that LOM and the individual respondents would comply with B.C. laws in the future with $100,000 in penalties for all of the corporate respondents, and $10,000 for each individual.

Stockwatch reports that at the hearing LOM?s representatives argued that LOM has co-operated with the investigation of San Telmo Energy and sanctions are not appropriate since LOM was not the target of the investigation itself.

The BCSC investigation of San Telmo Energy began after Market Regulation Services noticed an odd trading pattern in its shares by LOM-owned accounts.

A probe of the trading that took place between September 1, 2002-March 28, 2003 found that LOM Accounts accounted for approximately 15.5 per cent of the purchases and 35 per cent of the sales of San Telmo?s shares on the TSX Venture Exchange.

During that time, the LOM Accounts also engaged in 11 trades in which one of the LOM Accounts was the buyer and another one the seller.

They were also responsible for 20 per cent of the trading upticks (purchases that take place at a higher price than the last purchase) in the price of the shares of the British Columbia reporting issuer. As previously reported, the BCSC has asked LOM as well as the Bermuda Monetary Authority (BMA) for help in finding out who owned the accounts at LOM.

Sasha Angus, BCSC?s director of enforcement who appeared at the hearing on behalf of BCSC staff, alleged that instead of co-operating itself, LOM ?whipped up a lawsuit? and served it on the BMA to prevent the BMA from helping the BCSC. LOM argues in connection with this probe as well as another separate probe being conducted by the US Securities and Exchange Commission that it would rely on the laws of where it was incorporated not where it did business and that it had to abide by the confidentiality obligations of Bermuda.

Mr. Angus said, however, that in other documents such as account opening forms for B.C. accounts, papers were signed indicating that LOM recognised that it was acting under B.C. law.

He testified that the Bermuda-based company has a large presence in Canada, conducting approximately 10,000 trades there totalling over 800 million shares in the last 12 months. He said these were worth about $1.2-billion, which constituted about 40 per cent of LOM?s total business for the year.

The BMA and the Cayman Islands Monetary Authority (CIMA) have given the BCSC information during the past year on the proviso that it remain confidential and not be shared with any third party without consent from the organisation.

Mr. Angus reportedly said however that LOM specifically has not complied with information requests and in fact only provided the BMA with a sheet of trading activities, but each account was owned by a LOM subsidiary, not listing the beneficial owners.

Mr. Angus said that LOM?s stance to keep client names confidential left the BCSC unable to see if insider trading was going on or if the price of San Telmo was being manipulated.

He said that since LOM is the legal owner of all its accounts the beneficial owner of the accounts are not disclosed ?making LOM?s clients opaque, through the secrecy laws in the Caribbean countries, making the system perfect for those who wish to hide their activities.?

Stockwatch reports that LOM lawyer Nigel Campbell countered accusations during the hearing that LOM had been blocking the BCSC at every turn.

Mr. Campbell said: ?I do believe that when you look at the record, you?ll see quite the opposite.?

He pointed to numerous communications between the BCSC and his office, over the past several months, as the spirit of co-operation. He also reminded the panel that LOM is not the subject of an investigation and if the panel believed the innuendo that LOM was standing up to RS, or to the SEC, that was a smokescreen.

?It just happened that LOM had some offshore accounts and clients who were trading in San Telmo, and the BCSC needed that information,? he said adding that he was appearing at the hearing in one capacity and that was should LOM have provided the information, which was housed in the offshore jurisdiction?

Mr. Campbell later told the hearing the only issue at hand was whether BCSC staff should be obliged to make regulator-to-regulator contact before making unilateral demands of LOM, in circumstances where the information being sought was resident in the Caribbean, where confidentiality obligations existed.

He said: ?LOM was put in the middle of a dilemma, for if it bowed to the demands of the BCSC, it was forced to breach laws of the home jurisdiction. LOM sought a middle way in the matter,? he said.

Stockwatch reports that Mr. Campbell suggested an alternative, of applying to the courts in both countries, although he conceded that was a rather complicated route.

However, he said that it seemed unfair not to allow LOM an alternative to violating Bermuda law in order to satisfy B.C. law.

On April 23 this year, the BCSC issued an investigation order after LOM did not produce the documents requested. Stockwatch reports that the order was aimed at San Telmo and the LOM companies, Donald Lines and others, including Janice Gurian and Philip Gurianmay have broken sections of the B.C. Securities Act. Stockwatch reports that Mr. Gurian is an alleged Mafioso, whose name has come up 209 times in the BCSC?s just-completed hearing into Pacific International Securities. He is also a target of the SEC, relating to his alleged trading through LOM of HiEnergy Technologies Inc.

Mr. Campbell told the panel that there was no evidence that his clients had done anything wrong, regarding the trading of San Telmo, and the panel had to remember that was what the hearing was all about.

He said: ?The proper method for not producing documents was to go to court, not a commission panel.?

Mr. Angus later said:The BCSC needed trading information, and it would not be able to get that if the clients who would end up being targets of the investigation could hide themselves behind LOM.?

He said that having LOM act as the owner of local brokerage accounts, while taking orders from clients offshore, made it impossible for the BCSC to regulate the trades.

He said: ?The accounts beneficial owners were hidden away, and the BCSC would have a very difficult time in maintaining its regulatory role over LOM.?