North American regulatory probes involving a Bermuda-based investment firm have prompted some generalised comments in the Canadian media that ?demonstrate a lack of knowledge and understanding about Bermuda?s supervisory regimes for financial services,? according to a spokesperson for the Ministry of Finance.

Canadian newspapers and broadcasters reported last week that, in dismissing a staff application for cease trade orders and other sanctions against Lines Overseas Management, a British Columbia Securities Commission panel initiated a new hearing to determine whether such sanctions are appropriate against LOM for allegedly trading on behalf of undisclosed clients, contrary to the securities industry?s know-your-client rules.

BCSC staff originally requested sanctions against LOM and some of its executives for alleged non-compliance with their requests for the identities of the beneficial owners and other details concerning trading made by LOM through accounts at British Columbia investment dealers in shares of San Telmo Energy Inc. LOM said if it ?bowed to the demands of the BCSC, it was forced to breach laws of the home jurisdiction?, but it did provide an undetermined amount of this information to the BCSC via its home regulators.

?Bermuda can and does share information with other jurisdictions where a legitimate case is made to the Bermuda Monetary Authority and the Authority has co-operated with overseas regulators in this particular case,? the Ministry of Finance spokesperson said yesterday.

The BCSC panel said in its ruling that the correct procedure to force compliance was to apply for a court order under the Securities Act.

However, most news reports about the panel ruling focused on its subsequent request for submissions on an additional issue arising from the evidence presented by BCSC staff.

The evidence showed that between September, 2002 to March, 2003, LOM made a series of trades in San Telmo Energy Inc through accounts at Canadian investment dealers on behalf of undisclosed beneficial owners.

LOM has been ordered to show cause why it should not be prevented from doing business in the province until all the BC dealers it works through have appropriate know-your-client information.

The national newspaper, The Globe and Mail, which has an average daily readership of just under one million, was among those to report on the panels action.

Its story referred to LOM as ?located in secrecy havens? where ?once an account is opened, it can be used by hundreds of individuals whose identities are known only to the offshore brokerages offices.?

A spokesperson for the Ministry of Finance responds that ?Bermuda is not a banking haven nor is it a secrecy haven.?

?Financial institutions in Bermuda are subject to rigorous KYC requirements under the Proceeds of Crime Act and Regulations (POC) which are fully consistent with the standards imposed on institutions in other well-regulated centres. Such institutions are required to establish and maintain identification procedures for their client base. In addition, investment providers are required to maintain adequate accounting and other records of their business and adequate systems of control of their business records in order to meet their obligation under the Investment Business Act 2003,? the spokesperson said.

LOM said earlier this week that its broker-dealers in BC and Ontario ?are fully aware of LOM?s status as a brokerage.

?To say, as has been reported in several recent articles, that LOM ?may be acting as a front for undisclosed investors? is entirely misleading, and makes a completely legitimate relationship sound sinister and improper,? a company spokesperson said.

LOM said that if the BCSC review finds that the brokerage firms it regulates must obtain beneficial ownership information on underlying customers of foreign brokerages, ?then the BC brokerage firms will have to change its own policies and LOM will have to abide if it wants to continue to have accounts with BC firms.

?But it is not correct to imply that past accounts were being operated improperly.?asked David Ezekiel, chairman of the Association of Bermuda International Companies, his response on the news stories that recently circulated in Canada.

He said that while it is necessary to wait for the outcome of the various proceedings [involving LOM before making any judgments, ?Any negative publicity for a Bermuda-based company is something we would all like to avoid, but when one has a wide ranging commercial sector it is going to occur from time to time.?

LOM is planning to appeal a US District Court judge?s order to comply with four subpoenas from the SEC in relation to its investigation of alleged stock manipulation of Sedona Software Solutions, Shep Technologies and HiEnergy Technologies.

In this case too, LOM has argued that local laws prevent it from releasing information dealing with customer accounts.