Prospectus

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Prospectus

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.

prospectus

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 ?
offering materials that could be used in such distributions were terse announcements and dense statutory prospectuses that constituted the bulk
"By paying attention to such information as annual reports and prospectuses, you can find out, for example, when a portfolio manager shifts investments within a mutual fund, which can effect diversification across your investments," says Christine Peregrine, a financial advisor in Chicago.
Of course, the statutory prospectuses that funds have to put out contain all the information that investors need to know, but these lengthy tomes are no easy read, Atkinson says, and often intimidate more than they inform.
In 1996, the SEC began the pilot program in which participating companies agreed that the new prospectuses would not disclose proprietary business and financial information.
The current meaty prospectus layout has been required since 1933, when the SEC sought to make stock prospectuses more comprehensive.
In dismissing a portion of the plaintiff' claim against Price Waterhouse, the court ruled that the firm's review and approval of quarterly financial statements and prospectuses did not constitute the making of a material misstatement.
Those drafting prospectuses still must get the history right.