A prospectus is the primary disclosure document delivered to investors in a registered public securities offering. It is part of the registration statement filed with the SEC under the Securities Act of 1933.
Types of prospectuses: - Preliminary prospectus ("red herring"): Distributed during the cooling-off period; not final; marked in red on the cover. Allows broker-dealers to gather indications of interest but cannot be used to make sales. - Final prospectus: Delivered with or before the confirmation of sale; contains the offering price and effective date. - Free writing prospectus: Written communication other than a statutory prospectus that offers a security; generally only permitted after a registration statement is filed.
Required contents (key items): - Description of the securities being offered. - Price (or price range in preliminary). - Use of proceeds. - Risk factors. - Management discussion and analysis (MD&A). - Financial statements (audited). - Information about management. - Underwriting arrangements.
Rule 482 ("tombstone" ads): Factual announcements of an offering that don't constitute a prospectus; permitted even before the registration is effective.
Shelf registration (Rule 415): Large, well-known companies can register securities in advance and sell them in tranches over up to 3 years without filing a new full registration each time.
> Exam tip: The red herring can be distributed during the cooling-off period but cannot be used to sell. The final prospectus must accompany or precede the sale confirmation. Mutual fund prospectuses must be delivered at or before purchase.