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(Revised July 26, 2012)

by Mike Caswell

The Court of Appeal for British Columbia has overturned a cease trade order that the B.C. Securities Commission imposed on Bermuda brothers Scott and Brian Lines for their alleged roles in two OTC Bulletin Board manipulations. In a ruling handed down on Friday, July 20, the court has found that the BCSC unfairly ordered the ban without any evidence before the commission to support its orders. The commission based the ban solely on a settlement agreement the brothers entered with the U.S. Securities and Exchange Commission, and did not conduct a hearing of its own.

The SEC charges against the men stemmed from alleged manipulations of Vancouver-based Sedona Software Solutions Inc. and SHEP Technologies Inc. The U.S. regulator claimed that the brothers helped manipulate Sedona to $10 and then sold hundreds of thousands of shares. Without admitting any wrongdoing, the brothers and five companies they controlled settled the SEC's case in 2010, agreeing to disgorge $1.2-million "representing profits gained as a result of the conduct alleged in the [SEC's] Complaint." (All figures are in U.S. dollars.) Brian Lines also agreed to pay a $100,000 civil penalty and to serve a three-year penny stock ban in the U.S., while Scott Lines agreed to a $50,000 penalty and a two-year ban.

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