document that must accompany a new issue of securities. It contains the same information appearing in the registration statement, such as a list of directors and officers, financial reports certified by a CPA, underwriters, the purpose and use for the funds, and other reasonable information that prospective buyers of a security need to know. A preliminary prospectus, red herring (so named because of a red stamp indicating the tentative nature of the document during the period in which it is being reviewed for fraudulent or misleading statements by the Securities and Exchange Commission (SEC)), is issued prior to the final, statutory prospectus, which also contains offering instructions.
informational document stating the intent to issue securities, required by the Securities and Exchange Commission. Also called offering circular. A prospectus is the legal document stating the purpose of the security issue, describing in detail the primary business of the issuer and the issuer's financial condition, and listing the principal officers. It also describes how shares are offered for sale and dividends paid. A mutual fund prospectus describes redemption rights of investors who liquidate their holdings, and also lists management fees, redemption fees, and other charges payable by the investor if the fund being offered is a load fund. A prospectus is preceded by a preliminary disclosure known as a red herring. The prospectus itself is an offer to sell shares to the public. A prospectus supplement is an additional statement filed with the SEC containing information about the issuer not mentioned previously; supplements are normally issued in conjunction with shelf registration securities and contain further information on the particular issue being sold.
The Securities Act of 1933 requires only that issuers give full disclosure of information pertaining to a proposed offering. The SEC does not approve or disapprove the offering, but it allows the prospectus and the registration statement to clear on the 20th day after the filing date. If the SEC objects to the offering or asks for more information, the 20-day waiting period begins again unless an exception is granted.
formal written offer to sell securities that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision.
formal written offer to sell securities that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision. Prospectuses are also issued by mutual fund, describing the history, background of managers, fund objectives, a financial statement, and other essential data. A prospectus for a public offering must be filed with the Securities and Exchange Commission and given to prospective buyers of the offering. The prospectus contains financial information and a description of a company's business history, officers, operations, pending litigation (if any), and plans (including the use of the proceeds from the issue).
Offerings of limited partnerships are also accompanied by prospectuses. Real estate, oil and gas, equipment leasing, and other types of limited partnerships are described in detail, and pertinent financial information, the background of the general partners, and supporting legal opinions are also given.
a printed descriptive statement about a business or investment that is for sale, to invite the interest of prospective investors.
Example: A syndicator prepared a prospectus that disclosed all material facts about the property being offered. Before it is approved by the SEC or state securities commissioner, it is called a red herring. If it need not be approved, it is called a descriptlve memorandum.
