Forms of Prospectus

The prospectus is not one document. It is a sequence of documents the same registration statement produces at different stages of the deal.

Preliminary Prospectus (Red Herring)

The preliminary prospectus, or red herring, is the document used during the waiting period to take indications of interest.

• Filed with the SEC as part of the registration statement
• Contains substantially all of the final-prospectus content except the final offering price and items that depend on the price (offering proceeds, capitalization tables, dilution calculations)
• Marked with a red-ink legend on the cover stating that the information is subject to completion and that the security cannot be sold until the registration statement is effective; the red legend gives the document its industry nickname
• Distributed by the underwriting syndicate to institutional accounts during the road show

Exam Tip: Gotchas

• The red herring is a real statutory prospectus, not a marketing document. It carries the same anti-fraud exposure as the final prospectus for the content that is in it.
• The cover legend is required, not optional. A red herring missing the legend is not a valid preliminary prospectus and cannot be used to take indications of interest.

Pricing-Information Omission at Effectiveness

A second mechanism lets a registration statement go effective with the pricing information still missing, even outside the shelf context.

• Permits a registration statement to be declared effective without the final price and price-dependent terms
• The final price is then filed by prospectus supplement within 2 business days of the pricing decision or first use
• Typically used by non-shelf issuers (IPOs and follow-on offerings of issuers that do not have a shelf in place) so the deal team does not have to file a pre-effective amendment just to drop in the final price

The mechanism solves a timing problem. An IPO prices late on the evening before trading opens; SEC effectiveness needs to be in hand before the underwriters can confirm sales the next morning. Allowing the price to be added by post-effective supplement lets effectiveness happen the night before pricing.

Exam Tip: Gotchas

• The pricing-omission mechanism is NOT the access-equals-delivery rule. Two different concepts: this one lets the registration go effective without the price; access-equals-delivery is how the broker satisfies the delivery duty after the deal is priced.
• The 2-business-day filing deadline for the price supplement is binding. Missing it can compromise the effectiveness of the registration statement for the offering.

Base Prospectus Plus Prospectus Supplement (Shelf)

Shelf registration statements use a two-document structure.

• Base prospectus: the part of the shelf registration statement at effectiveness; generic in scope, with general information about the issuer and the kinds of securities that may be offered off the shelf
• Prospectus supplement: filed at each takedown to add the offering-specific terms (deal size, price, use of proceeds, selling syndicate, plan of distribution)

The base prospectus plus prospectus supplement together form the statutory prospectus for the shelf takedown. The supplement is not a separate registration statement.

Exam Tip: Gotchas

• The supplement is a piece of the base prospectus, not a new registration statement. Filing it does not require a new effectiveness order; the shelf is already effective. A common exam trap is treating each takedown as a new registration event.
• WKSI shelves can also defer selling-securityholder information under the post-effective shelf-prospectus mechanism. The supplement adds the selling-securityholder names at the takedown.

Final Prospectus

The final prospectus is the full statutory prospectus delivered (or made available) in connection with sales.

• Filed with the SEC under one of the prospectus-filing categories
• Contains the full content of the registration statement, including the final price, size, use of proceeds, selling syndicate, and any updates made during SEC review
• The compliance document for the broker-dealer's delivery duty after effectiveness

The filing-category framework matches the type of prospectus to the deadline:

• Pricing-supplement filing for non-shelf offerings: typically used for IPOs and follow-on offerings; filed within 2 business days of pricing or first use
• Shelf primary offering supplement: filed at each takedown
• Substantive-change sticker or supplement: required when a material change has occurred since the last filed prospectus
• WKSI selling-securityholder supplement: used to add selling-securityholder names to a base prospectus after effectiveness

Exam Tip: Gotchas

• The final prospectus filing is a precondition for legal sales in the post-effective period. Selling activity before the final prospectus is on file is a written-offer violation.
• The 9-month financial-statement freshness rule kicks in when a prospectus is used more than 9 months after the effective date: the financials in the prospectus must be dated not more than 16 months before use. This is a quiet trap for issuers that keep a shelf alive for the full 3-year life.