Issuer and structural schemes
Issuer and structural schemes manipulate the supply of shares and the corporate vehicle itself — creating shells, hiding control, and issuing stock in ways designed to be sold into a market that has been prepared for it.
Issuer and structural schemes operate on the share register rather than on the order book. They create the vehicle, manufacture the stock, and arrange the ownership so that a large block can be sold into the public market without anyone being able to see who is selling or why the shares exist.
These are the least visible techniques on this site and, in enforcement terms, among the most consequential. A pump and dump requires stock to dump. Where that stock comes from, how it became freely tradable, and who really controls it are questions answered in this family. Very often the promotional campaign that draws attention is the last stage of a structure that was built months or years earlier.
The supply chain
Most schemes in this family follow a recognisable sequence, and the techniques are best understood as stages of it rather than as alternatives.
Obtain a listed vehicle. Either by manufacturing one — a shell factory produces companies with nominal businesses, nominee shareholders and a quotation, built for resale — or by taking over a dormant one. Custodianship shell hijacking uses state-court receivership processes to seize control of abandoned public companies and issue new stock in them, which is why the SEC scrutinises custodianship-derived listings closely.
Give it a story. A reverse merger takes a private business public by merging it into the shell, avoiding the disclosure and scrutiny of a registered offering. The structure is entirely lawful and has legitimate uses; what makes it a manipulation vehicle is when the merged business exists mainly to justify a share price.
Create tradable stock. This is the crux. Securities issued privately are restricted and cannot be freely resold until conditions are met. Schemes to defeat that — backdated consulting agreements, opinion letters removing transfer restrictions, convertible notes converting at a discount, shares issued to nominees who are not really independent — turn restricted stock into sellable stock. An unregistered distribution under Securities Act § 5 is a strict liability violation: no deception need be proved at all.
Hide the control. Undisclosed control blocks are the mechanism that makes the rest work. Anyone holding more than five per cent of a registered class must disclose it, and affiliates face resale restrictions. Holding the position through nominees, family members or offshore entities defeats both. Parking and free-riding are the specific variants: placing securities in someone else’s name while retaining the economic interest.
Extract. Either through a promotional campaign, or through dilution death spirals — convertible instruments that convert at a discount to the prevailing market price, so each conversion dilutes holders and pushes the price lower, entitling the holder to still more shares. These are structurally extractive without requiring any promotion at all.
Why these are prosecuted differently
Two features distinguish this family from the rest of the site.
Strict liability is available. Section 5 of the Securities Act prohibits unregistered distributions regardless of intent, deception or harm. A regulator who can establish that a distribution occurred without registration or a valid exemption has a violation without litigating anyone’s state of mind. This makes these cases substantially easier to bring than manipulation cases, and it is why so many microcap actions are charged this way.
The paper trail is durable and third-party held. Transfer agent records, attorney opinion letters, corporate filings and share issuance histories are kept by people other than the perpetrator and are hard to alter after the fact. Where an order-book case depends on inferring intent from behaviour, a structural case often turns on documents that say what was done.
The countervailing difficulty is that the conduct is slow and unglamorous. A shell built in 2021, merged in 2023 and promoted in 2025 does not produce a single identifiable moment of wrongdoing, and the participants are dispersed across attorneys, transfer agents, consultants and nominee holders whose individual acts may each look defensible.
The structural reforms that changed the landscape
Two regulatory changes have done more to reduce this family’s prevalence than any number of individual enforcement actions.
The amendments to Rule 15c2-11 in 2020 require that current public information about an issuer exist before a broker-dealer may publish quotations in its securities. This attacked the supply of usable shells directly: a shell with no current information cannot be quoted, and an unquoted shell is worth very little to a promoter. The population of quoted shell companies fell substantially afterwards.
Tightened transfer agent and opinion letter scrutiny attacked the other bottleneck, since converting restricted stock into free-trading stock requires someone to give an opinion that it may be done. Enforcement against attorneys who supplied such opinions without support has made that step considerably harder to buy.
What to look for
The observable signals in this family appear in filings rather than in prices, which makes them available to anyone willing to read.
A recently changed corporate name, business description or ticker symbol. A custodianship or receivership in the company’s recent history. A share count that has grown by multiples without a corresponding capital raise. Convertible notes with conversion prices set at a discount to market. Consulting agreements settled in stock. Beneficial ownership filings that are absent where a concentrated holding evidently exists.
None of these is individually conclusive; each is legitimate in some context. Together, in one company, they describe a vehicle built for something other than operating a business.