A prospectus is a written disclosure provided with the registration statement that helps the SEC to evaluate the financial risk of an investment.

Question

Quizplus · Accepted Answer

A prospectus is primarily designed to provide investors with the details about an investment offering for sale, including financial statements, management background, any legal problems, where the money from the sale is going, and the risks involved, rather than for the SEC's evaluation of financial risk. The SEC reviews the registration statement (which includes the prospectus) to ensure compliance with legal and regulatory requirements, not to evaluate the investment's financial risk for its own purposes.

A Prospectus Is a Written Disclosure Provided with the Registration