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Legally mandated document published by every firm offering its securities to public for purchase. It must comply with strict legal requirements and is filed for approval with the country's securities inspectorate such as the Securities & Exchange Commission (SEC) of the US, or the Securities & Investment Board (SIB) of the UK. A prospectus must disclose essential information such as (1) firm's objectives, (2) primary business activity, (3) background and qualification of principal officers, (4) current financial position, (5) projected financial statements, (6) assumptions underlying the projections, (7) foreseeable risks to the firm, (8) offering price on the stock (shares), and (9) (in case of bonds and notes) how the interest and principal will be paid.
Sometimes, a prospect is preceded by an offering circular (called a red herring) and/or a preliminary disclosure (called pathfinder), but they, although legitimate, are not legal documents.

Use 'prospectus' in a Sentence

It is a requirement that stockbrokers distribute prospectus reports showing the historical data, returns, and background information for each stock or mutual fund that is in their client's portfolio.
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The investment company typically sent out its prospectus to anyone who had expressed interest in its financial products or investment options.
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The firm had worked hard to create a perfect prospectus in the hopes that the investors would find the firm worthy enough of their capital.
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