Selecting The Best Illinois Catholic Prep School Selecting
The Best Illinois Catholic Prep School May
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2015 | Author: Olivia Cross | Posted in Education
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Anti Fraud Provisions Apply To Public Float Schemes When companies go public
through reverse merger transactions, insiders often employ various mechanisms to
obtain not only control of the public shell but also of its free trading shares.
Public float schemes involving penny stocks have been around for years and
have become routine features of reverse merger transactions, particularly where
the services of third party escrow agents are used. A recent court decision may
change the laws applied to schemes where the participants obtain control of an
issuer’s public float.
The Escrow Agents
Public float schemes can be structured in a number of ways, and a variety of
steps can be taken to conceal the fraudsters’ control. One common method is to
use an escrow agent, who is typically a complicit attorney. Regardless of how
the transactions are structured, the escrow agent holds and transfers all or
substantially all of an issuer’s unrestricted shares to the participants without
making public disclosures about the control of the public float or the persons
involved.
The Reverse Splits And Illegally Free Trading Shares
Often a large reverse split is done in conjunction with reverse merger
transactions. Once the initial transaction is complete, illegally free trading
stock is issued and delivered to a third party such as an escrow agent or other
participant working in collusion with the shell purveyors. Fraudsters and
incompetent andor complicit attorneys find ways to remove legends without
compliance with the SEC’s registration requirements. The fraudsters and these
attorneys cause the issuance of free trading shares upon conversion of aged debt
or convertible notes Wholesale NFL
Jerseys Free Shipping , using baseless legal opinions improperly applying
the Rule 504 exemption and or Rule 144′s safe harbor.
The Bogus Form S-1 Public Float Schemes
Fraudulent S-1 filings are commonly used in public float schemes. Fraudsters
file bogus S-1 registration statements registering nominal amounts of shares
held by selling shareholders to create free trading shares. These registration
statements contain bogus business plans and nominee selling shareholders. Once
the S-1 is deemed effective, the participants declare large forward stock splits
or stock dividends and deliver the shares issued to themselves or to escrow
accounts andor complicit attorneys for delivery at a later date. In some of the
most brazen frauds, the S-1 shell becomes the subject of an aggressive
promotional campaign centered around a fabricated business plan.
After the public float scam is complete, the fraudsters can even resell the
S-1 shell to a private company seeking to go public. In some circumstances, the
private company may have no idea who really controls its public float.
The Role of the Investor Relations Firms
It is common for stock promoters andor investor relations firms to create
shells using bogus S-1 registration statements and nominee shareholders,
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