ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A prospectus is a written document that provides all material information about an offering of securities, and is the primary sales tool of the company that issues the securities (called the issuer) and broker-dealers that market the offering for the issuer (called underwriters).

Detailed explanation-2: -A prospectus is an essential disclosure document that a company has to issue at the time of issuing investment securities to the public. These formal documents provide detailed information to prospective investors about mutual funds, bonds, stocks, and other investment offerings to the public.

Detailed explanation-3: -Shelf prospectus meaning For any company to raise money from the public, they have to file a prospectus with the Securities and Exchanges Commission of India or SEBI. If the company is looking for an IPO, it must file a red herring prospectus or IPO prospectus, explaining the IPO and the company in detail.

Detailed explanation-4: -The term “red herring” is derived from the bold disclaimer in red on the cover page of the preliminary prospectus. The disclaimer states that a registration statement relating to the securities being offered has been filed with the SEC but has not yet become effective.