A prospectus is a legal disclosure document that is provided by a company when the company wants to sell its securities to the public.
Typically created by the company's legal and accounting departments, a prospectus is a formal invitation to the public to subscribe to the shares of a public company.
A prospectus includes all the necessary details about the sale of a company's securities. It contains the company's financial position, the number of shares being offered and the types of securities in the offering.
Issuers provide a preliminary and final prospectus. The preliminary prospectus is the initial offering document that details the proposed transaction. The final prospectus is provided when the offering is finalised and made public for subscription.
There are three different periods during the U.S. registration process:Pre-filing period.Waiting period.Post-effective period.
A mutual fund and exchange-traded funds prospectuses are similar to those for stocks and bonds but, in this case, the SEC requires funds to make information available to interested investors.
The history of the prospectus stems from the Securities Act of 1933, which was the first federal legislation used to regulate the stock market.
The act took power away from the states and put it into the hands of the federal government.