Here is a 3-week old article which someone may want to run by the company... I think it is worth reading.
LOM told: Name your clients
By Lilla Zuill
Bermuda-based investment firm LOM (Holdings) Limited has been cited by a Canadian regulator for not revealing the identities of clients in a case under investigation.
The British Columbia Securities Commission (BCSC) on May 20 filed a notice of hearing naming LOM, a number of subsidiaries and executives and directors as failing to release information requested by the BCSC for its investigation of transactions between June 2002 and July 2003 in a Canadian company listed on the TSX Venture Exchange.
The hearing has now been set for October 5 and 6.
In a separate Press statement, LOM said the matter related to San Telmo Energy Ltd. and claimed it cannot release the information as it would put it in breach of Bermuda law.
The company, separately, last year launched legal action against the Bermuda Monetary Authority (BMA) to try to stop new regulations forcing it to hand over details about private clients to overseas regulators. The company has said if laws were changed it would “kill business”.
LOM explained that the BCSC request related to more than 50 LOM customer accounts that transacted in San Telmo stock, including customers of LOM’s affiliates in Bermuda, Grand Cayman, and the Bahamas.
The company said there were no trades in this security during this period on behalf of LOM or its officers and that none of the customer accounts that transacted in the security are managed or administered by any of the LOM executive officers.
The Commission said the intent of the hearing was to give LOM (Holdings) Limited, LOM Securities (Bahamas) Limited, LOM Securities (Bermuda) Limited, LOM Securities (Cayman) Limited, and Lines Overseas Management Limited, Donald P. Lines, Brian N. Lines, Scott G. S. Lines, Malcolm Moseley David McNay and J. Scott Hill (collectively, the respondents) an opportunity to make their case and for the Commission to decide what action to take.
In the case, the BCSC alleges the LOM’s trades accounted for about 15.5 percent of the purchases and 35 percent of the sales of the shares of the Company (San Telmo) on the TSX Venture Exchange; engaged in 11 trades in which one of the LOM Accounts was the buyer and another one the seller; and were responsible for 20 percent of all of the ‘upticks’ (purchases that take place at a higher price than the last purchase) in the price of the shares of the Company.
The Commission claimed to have, on November 6, 2003, sent a request to the BMA requesting its help in getting from LOM the requested information on the customers who had invested in San Telmo.
This the BMA did, but LOM reportedly only handed over a transaction report for San Telmo documenting 5.6 million trades during the period but declined to give any details that would reveal the actual persons who conducted the purchase and sales of the shares.
The notice of hearing added that Lines Overseas Management Ltd. and LOM Securities (Bermuda) Ltd. have commenced a court action against the BMA in Bermuda to resist providing the requested information.
In its Press statement, LOM said: “LOM was concerned that providing client-specific information requested on behalf of foreign regulators could open LOM to potential liability. LOM therefore filed a motion in the Supreme Court of Bermuda asking the Court to review the legislation and make a determination of the meaning of the law. LOM on advice of counsel notified the BMA that it would be unable to provide information of the sort being considered in the hearing, pending the outcome of that hearing.”
Yesterday Munro Sutherland, the BMA’s superintendent of banking, trusts and investment said the Authority could not discuss particulars of the case between BCSC and LOM. However, Mr. Sutherland did say that present legislation was clear in providing the Authority the powers to ask Bermuda companies to hand over information to foreign regulators when necessary.
He said that a legal challenge by LOM had been mounted but that he understood Government to be planning amendments to legislation that would make it clear “beyond doubt” that the BMA had the authority and ability to request a company to pass on information to another regulator, when the request was legitimate.
Mr. Sutherland said the matter related to a section in the Bermuda Monetary Authority Act which gives the BMA compulsory powers to make entities with a licence provide them with information that can be passed on to foreign regulators. He said this was expected to come before the House during this Parliamentary session, or in the coming weeks, as it was seen as “critical” to protecting the Island’s reputation as an international business jurisdiction.
For its part, LOM said it had cooperated with the Commission through its Canadian legal counsel (Blake, Cassels & Graydon) but “that it had been placed ‘between a rock and hard place’ in that it cannot comply with the Commission’s requests without breaching local laws.
LOM has provided the Commission with affidavits from counsel in Bermuda, Cayman and Bahamas detailing the relevant laws”.
LOM said it had done its best to work with the Commission by agreeing to approach the relevant customers and seek their consent to release the requested information.
But it said that was turned down by the Commission who refused to waive the confidentiality requirement covering its investigation, despite the fact that this was the only legal manner in which LOM could provide the information being requested.
However, now that a notice of hearing has been announced, LOM understands, under recently enacted regulations, the investigation is then not considered confidential. LOM is therefore now in the process of contacting relevant customers in order to seek the necessary consents.
The notice of hearing laid out several penalties that could be brought against LOM including the possibility of administrative fines being laid, costs from the hearing charged to respondents and even the imposing of a cease trading order.
LOM said it was “unreasonable for the Commission to seek penalties when LOM is being asked to breach local laws, LOM has also noted that there are established, legal mechanisms through which the Commission can seek information via the regulators and the courts of the Cayman Islands, Bahamas and Bermuda. To date, they have made no effort whatsoever along these lines in Cayman or Bahamas,” it said.
LOM chairman Donald Lines told The Royal Gazette in January it had taken legal action against the BMA as changes to laws would have wide-ranging effects on Bermuda’s wealth management industry and it could be badly affected if the BMA is allowed to get its hands on details about private clients and then pass them on to foreign regulators.
“It is a total violation of the privacy of private clients,” he said. “There is no sign that these people are doing anything wrong.”
And Mr. Lines predicted that Bermuda’s profitable trust industry will up and leave if lawmakers go ahead with proposed wide-ranging new legislation that will allow the BMA to demand similar information about trusts.
“This is a matter of principle,” said Mr. Lines about the writ, which was filed on December 30, by LOM, which is a financial institution, and its subsidiary Lines Asset Management. “And it affects all business in Bermuda – not just LOM.”
