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A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security.

A prospectus is a document or a publication by, or on behalf of, a corporation containing information on the character, nature, and purpose of an issue of shares, debentures, or other corporate Securities that extends an invitation to the public to purchase the securities. The content of a prospectus is regulated by federal law. It must contain all material facts relating to the company and its operations so that a prospective investor can make an informed decision as to the merit of the investment. A prospectus must be furnished to an investor before any purchase is made.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.


n. a detailed statement by a corporation required when there is an issuance of stock to the general public. A prospectus includes the financial status, the officers, the plans, contingent obligations (such as lawsuits) of the corporation, recent performance and other matters which would assist the potential investor or investment adviser to evaluate the stock and the prospects of the company for profit, loss, or growth. The Federal Securities Act requires the filing of the prospectus with the Securities and Exchange Commission and the SEC's approval before any major stock issue. State laws generally require similar documentation for some issuances or offers of sales of stock within the state. Every potential purchaser of a new stock shares must receive a copy of the prospectus, even though they are difficult to understand. Offerings to the public of limited partnership interests may require that a prospectus be prepared and delivered to each investor. (See: corporation, stock, limited partnership, Blue Sky laws)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
One of the first financial data requirements for the Franchise Offering Circular is a table disclosing a new franchisee's anticipated initial investment.
The disclosure document must include audited statements for the preceding three years, or such shorter period the franchisor has been in existence, and interim financial statements (which need not be audited) dated within 90 days of filing the proposed offering circular with the government.
Normally, each of the following financial statements of the franchisor must be part of the offering circular:
* A balance sheet, which need not be audited, dated within 90 days of filing the proposed offering circular in that state.
* If an unaudited balance sheet is used to meet the above requirement, an audited balance sheet dated as of the end of the franchisor's last fiscal year ending 90 days or more before the filing date of the offering circular.
Some states permit the offering circular to include the above financial statements of the parent company.
The initial compliance letter should remind the franchisor about the state and federal requirements to update the offering circular as material changes occur.
If no earnings claim has been included in the offering circular, the letter should explain the strict prohibitions against any type of response to an inquiry regarding income possibilities, and the exception for the sale of an existing unit.