Tag: Wrap around agreements

Coral Capital Partners looks at the use of wrap around agreements in the securities industry; with an emphasis on the Securities Exchange Commission’s (SEC) position as to when they are legal and when they are a violation of securities rules and regulations. Coral believes that it is very important that investors and corporations understand how wrap around agreement are used in order to circumvent the restrictions of Rule 144 of the Securities Act, and how this form of securities fraud can be used to harm shareholders and investors in companies.

SEC Action on Wrap Around Agreements

Coral Capital Partners looks at recent SEC enforcement actions involving wrap around agreements, which are being used by companies and stock distributors to illegally convert debt into free trading shares. This has been a common practice since the SEC revised Rule 144 back in early 2006. The complaints provide a very good explanation as to how these wrap around agreements work In the most recent action the SEC sought sanctions against the attorney who wrote the legal opinions allowing for the shares to be issued without restrictive legends via the exemption provided by Rule 144.