Offering Documents and Delivery Requirements
With the types of offerings and shelf registrations covered, the next logical question is: what documents must be provided to investors? The answer depends on the type of offering.
Key Offering Documents
| Document | Used For | Key Contents | Required By |
|---|---|---|---|
| Prospectus | Public offerings of corporate securities | Description of the security, issuer's business, financial statements, risks, use of proceeds, management info | Securities Act of 1933, Section 10 |
| Preliminary prospectus (red herring) | Distributed during the waiting/cooling-off period | Same as prospectus but without final price or effective date; printed with red ink disclaimer on cover | SEC rules during the cooling-off period |
| Official statement (OS) | New municipal bond offerings | Equivalent of a prospectus for munis: describes the issuer, terms, security, and risks | Municipal Securities Rulemaking Board (MSRB) Rule G-32 |
| Program disclosure document | Municipal securities programs (e.g., 529 plans) | Ongoing disclosure for continuous municipal programs | MSRB Rule G-32 |
| Summary prospectus | Mutual funds | Condensed version of the full prospectus; investors can request the full version | SEC Rule 431 |
| Private placement memorandum (PPM) | Private placements (Regulation D) | Disclosure document for private offerings; NOT reviewed by the SEC | Regulation D |
The Preliminary Prospectus (Red Herring)
- Called a "red herring" because of the red ink disclaimer printed on its cover
- Distributed during the cooling-off period (the waiting period between filing the registration statement and the SEC declaring it effective)
- Purpose: gauge investor interest and provide preliminary information
- Contains most of the same information as the final prospectus except the final offering price and effective date
- No sales can occur during this period; only indications of interest are allowed
Exam Tip: Gotchas
- No sales during the cooling-off period. A preliminary prospectus (red herring) can gauge investor interest, but NO sales can occur until the SEC declares the registration effective and the final prospectus is available.
The Final Prospectus
- Must be delivered to investors at or before the time of sale for public offerings
- Contains all material information about the security and the issuer
- Under the Securities Act of 1933:
- Section 7 and Schedules A and B specify what information must be in the registration statement
- Section 10 specifies what must be in the prospectus
- Section 8 covers the effective date of the registration statement
Exam Tip: Gotchas
- The SEC does not "approve" securities. The SEC only declares a registration statement "effective." If an exam answer says the SEC "approved" a security, that answer is wrong.
Municipal Bond Documents
- Municipal bonds use an official statement (OS) instead of a prospectus
- The OS serves the same purpose: full disclosure of material information to investors
- Governed by MSRB Rule G-32, which requires delivery of the official statement to purchasers
- MSRB Rule G-34 covers CUSIP number requirements for new municipal issues
- For ongoing municipal programs (like 529 college savings plans), a program disclosure document provides continuous disclosure
Summary Prospectus
- A condensed version of the full prospectus, used primarily for mutual funds
- Authorized by SEC Rule 431
- Investors who receive a summary prospectus can always request the full version
- Designed to make key fund information more accessible and easier to understand