A bid by the British Columbia Securities Commission's staff to have Bermuda-based Lines Overseas Management Ltd. cease trading on BC exchanges has been rejected by the Commission.

The BCSC ruled on Tuesday that there was no evidence on which to issue a cease-trade order against the brokerage, which is being investigated by US regulators over allegations of fraud and market manipulation.

Commission staff alleged that LOM had been trading on behalf of undisclosed clients through a number of B.C. brokerages.

The National Post reported yesterday that over the past year, LOM traded more than 800 million shares in the Canadian markets totalling about $1.2 billion.

BCSC staff alleged LOM and a number of its subsidiaries failed to provide required information about the individuals on whose behalf the trades were being made.

The regulator wanted to stop LOM from trading until it discloses for whom it was trading.

However, LOM argued that proper information had been provided to the B.C. brokerages through which it made its trades.

On Tuesday, BCSC spokesman Andrew Poon told the National Post that the regulator's enforcement staff was "considering our position at this point" in wake of the commission's ruling not to issue a cease-trade order against LOM.

In the United States, the Securities and Exchange Commission has served subpoenas on LOM and Scott Lines, its managing director, as part of investigations into alleged fraud and market manipulation of three public companies.

The SEC alleges it has found "certain individuals" traded extensively in the shares of Sedona Software Solutions Inc., SHEP Technologies Inc. and Hienergy Technologies Inc. "through accounts at LOM in Bermuda, the Bahamas and the Cayman Islands".

Canadian regulators also have been looking at the trading through LOM accounts ? and not just who is behind them, the National Post said.

Since October, 2003, the BCSC has been investigating a series of trades in the shares of San Telmo Energy Inc., a TSX Venture-listed firm, in 2002 and 2003. Many of those trades were made by LOM through B.C.-based brokers, the BCSC alleges.

The trading in San Telmo shares was referred to the BCSC by Market Regulation Services Inc. (RS), which monitors trading on Canada's major markets.

Among the brokerages which held LOM or LOM-related accounts were Haywood Securities Inc., Raymond James Ltd., Research Capital and Desjardins Securities, according to the BCSC.

RS alleged that trades by LOM accounted for a large part of both sales and purchases of the stock and that LOM was both the buyer and seller in some trades, using accounts at different brokers. Also, RS alleged the LOM trades were "responsible for 20 percent of the upticks in the price of San Telmo shares," according to a BCSC document.

Earlier this year, the BCSC dismissed an application by staff for enforcement orders against LOM and against other companies and individuals related to Lines Overseas.

In the January 12, 2005 decision, the panel considered the account opening forms for Lines Overseas at some British Columbia dealers.

It said the forms appeared to show that "at least some" of Lines Overseas' trading "is being done on behalf of undisclosed beneficial owners."

Noting that Lines Overseas was very active in Canadian markets, the panel went on to ask the parties for submissions to determine whether the commission should order that Lines Overseas cease trading in B.C. until it provided complete information to its dealers.

After considering the parties' submissions, the panel ruled that it did not have sufficient evidence to make the cease trade order, saying: "Although we still hold the concern we expressed in our January decision, we have no evidence on which to make a cease-trade order . . . against Lines Overseas . . . (T)he onus of establishing that it would be in the public interest to do so rests on the Executive Director. If the Executive Director wishes to pursue the matter, the necessary evidence should be gathered and a notice of hearing issued."