Brothers Brian and Scott Lines and five subsidiaries of Bermuda-based LOM (Holdings) Ltd. paid out a combined sum of more than $2.5 million as part of the settlement of a complaint by the US Securities and Exchange Commission (SEC).

LOM and the SEC yesterday each announced the approval of the settlement by the US District Court for the Southern District of New York, which brings to an end more than seven years of investigation and litigation.

The SEC, the US financial regulator, had alleged the Lines brothers and LOM subsidiaries profited from a "pump and dump" scheme, creating artificially-stimulated demand for shares of SHEP Technologies Inc. and Sedona Software Solutions Inc. None of these parties admitted or denied the allegations under the terms of the settlement.

As part of the resolution, the SEC agreed to dismiss with prejudice the pending civil enforcement action against LOM (Holdings) Ltd., the Bermuda Stock Exchange-listed public parent company of the LOM entities named in the settlement. The subsidiaries, LOM CEO Scott Lines and former LOM president Brian Lines paid out a combined $1,277,403 plus accrued pre-judgement interest of $654,918.

In addition, the subsidiaries, namely Lines Overseas Management Ltd, LOM Capital Ltd., LOM Securities (Bermuda) Ltd., LOM Securities (Cayman) Ltd. LOM Securities (Bahamas) Ltd. were ordered to pay a combined civil penalty of $450,000. The court also imposed civil penalties on both Lines brothers: Brian Lines will pay $100,000, while Scott Lines will pay $50,000.

Also under the terms of the agreement, LOM agreed not to maintain accounts for US customers for two years, not to trade in securities on the US OTC-Bulletin Board or Pink Sheet markets for two years and to engage an independent consultant who will monitor compliance with the settlements.

Scott Lines also agreed not to trade in penny stocks quoted on the US OTC-Bulletin Board or Pink Sheet markets for two years, and Brian Lines likewise, for three years.

In its statement, LOM said it had stopped accepting new accounts for US residents in 2001.

The company added its dealing on the US OTC-Bulletin Board or Pink Sheet markets was reduced to "a negligible amount" in 2005, after an internal policy change. LOM said it will not pay any of the disgorgement and that the penalty would not have a material effect on the financial statements of LOM, since the majority is covered by a provision already made by LOM for litigation-related costs in 2007.

"Today's court approval brings to a close a seven-and-a-half-year SEC investigation and civil litigation," Scott Lines said. "We are committed to delivering high quality financial services that comply with the highest legal standards to serve our individual and institutional customers in more than 75 countries."

The settlement also included two others that the SEC alleged had been involved in the scheme. Anthony Wile was ordered to pay a civil penalty of $35,000 and Wayne Wew to disgorge approximately $8,000 and pay a $10,000 civil penalty.

LOM director Quinton Edness said: "We are pleased to conclude this matter with the SEC. "This settlement is in the best interest of LOM, its customers and shareholders. LOM's board looks forward to the continued leadership of Scott Lines and the management team."