Before investors commit money, your deal team must explain what they are buying and how the issuer will use their money. The issuer is the company offering its securities. Its registration statement is the disclosure package filed with the Securities and Exchange Commission (SEC). The prospectus is the investor-facing disclosure document within that package.
Securities Act Sections 5, 7, and 10 perform different jobs. Section 5 controls offering, selling, and prospectus delivery. Section 7 specifies information required in the registration statement and supporting documents. Section 10 governs prospectus content.
For an initial public offering (IPO), you commonly use Form S-1, the general registration form for issuers without another suitable form. Part I contains prospectus information; Part II contains additional information, exhibits, and undertakings. Investors need the prospectus, but generally do not receive every registration-statement exhibit. Form S-1.
Drafting offering documents requires coordinated work. Management supplies facts, issuer counsel organizes disclosure, underwriters and their counsel challenge inconsistencies, and independent accountants supply audited financial statements.
Common mistakes
- Treating day 20 as a guaranteed sale date. Check actual effectiveness and delaying amendments.
- Replacing the 48-hour preliminary-prospectus requirement with Rule 173's two-business-day notice deadline. They govern different events.
- Calling every shelf a two-year shelf. Separate quantity limits from the applicable three-year offering period.
Bottom line
- Filing permits qualifying offers; effectiveness permits sales.
- Preliminary prospectuses can omit final pricing; final prospectuses supply completed offering terms.
- WKSIs can use automatic shelves that become effective upon filing.
- EGC revenue eligibility requires less than $1.235 billion; its debt exit requires more than $1 billion over three years.
Exam shortcut
Start with the act: an offer, binding sale, prospectus filing, customer delivery, or ongoing report. Similar-looking deadlines attach to different acts. Circle the issuer classification before using any exception. An IPO, an EGC, and a WKSI describe different features. For thresholds, write the comparison sign before calculating. “At least,” “more than,” and “below” decide equality cases.
The full lesson (about 3,724 words, 25 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- B13
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