A prospectus is a document containing the details of a prospective securities offering, which is filed with the Securities and Exchange Commission. The depth of information covered is intended to inform investors about the risks involved if they were to purchase the related securities. Examples of the topics found in a prospectus are:

  • The identity of the issuer
  • The identities and experience of the management team
  • The capitalization of the issuer
  • The number, type, and price of securities to be offered
  • The fees to be paid by the issuer that associated with the offering
  • The purposes to which the resulting funds will be put
  • Details about what the issuer does
  • The risks to which the issuer is subjected
  • The audited financial statements of the issuer

By including a massive amount of information in a prospectus, the issuer protects itself from charges by investors that they suffered losses because the issuer withheld key information from them.

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