Tuesday, July 24, 2012

The Royal Gazette article: Lines brothers win appeal against British Columbia cease trading order

LOM founders Scott and Brian Lines have won an appeal against a Canadian regulator’s cease trading order against them personally. The order had arisen from a 2010 US judgment the brothers consented to following their agreement with the US Securities and Exchange Commission to be subject to sanctions.

Read the full article here:
http://www.royalgazette.com/article/20120724/BUSINESS/707249981

Monday, July 23, 2012

Scott Lines wins appeal: B.C. Court Overturns Regulators Cease Trading Order

In April 2012, the British Columbia Securities Commission (“BCSC”) improperly issued a reciprocal order against me (set to expire after 6 months), in reference to an undertaking I agreed to as part of an SEC settlement in 2010.  I appealed the order in the Court of Appeal for British  Columbia.  The B.C. Court overturned the order on July 20th.   (See “Lines appeals Canadian regulator’s ‘cease trading’ order”, The Royal Gazette, June 5th, 2012.)

As detailed in an article published in The Royal Gazette on June 5th   (“Lines appeals Canadian regulator’s ‘cease trading’ order”), my appeal to the Court of Appeal of British Columbia  over a reciprocal order issued by the British Columbia Securities Commission (“BCSC”) was successful, with a decision in my favor issued on Friday, overturning the order.

In its decision, the Court agreed with my assessment that the BCSC failed to understand the meaning and context of the settlement that I and certain LOM entities entered into in October 2010, when we settled a civil suit with the SEC, stemming from transactions occurring 10 years ago.   LOM and I settled only in regard to charges of alleged negligence (and not intentional or reckless conduct).   There was no trial, no admission or finding of wrongdoing or liability, and no adjudication or finding of fact by any court.   And although the final “neither admit nor deny” settlement is in the form of a judgment, this was by way of our consent and simply means the judge approved the settlement that was mutually agreed between the parties.  The matter was fully resolved as a result.

The B.C. Court summarized its decision as follows:   “But the Director’s argument ignores the fact that in this case, there was no determination by any court or regulatory authority that the Lines had in fact broken any such laws  (emphasis added). Nor did the Lines admit to doing so. Essentially, then, the Commission made the leap in logic from the fact that the Lines had consented to certain sanctions without admitting wrongdoing, to the conclusion that the public interest required that they be prohibited from trading in all securities in British Columbia. Bearing in mind that the standard of reasonableness is concerned with “the existence of justification, transparency and intelligibility within the decision making process (Dunsmuir, para. 47), I am constrained to the conclusion that the Commission’s order was unreasonable. Essentially, it imposes a severe sanction on each of the Lines for entering into a settlement agreement in which no wrongdoing was admitted. The evidence relied on did not, and could not, justify the more onerous order.”