What is a prospectus and how does it help me?

The Securities Act generally requires companies issuing new securities, including stocks or bonds, to file a Registration Statement with the SEC before they can raise capital from the public. This is supposed to enable the new investors to have "full disclosure" of all "material facts" investors would find important in making an investment decision.

The Registration Statement includes a "prospectus" which is the legal offering or "selling" document. The company - the "issuer" of the securities - must describe in the prospectus the important facts about its business operations, financial condition, and management. Everyone who buys the new issue, as well as anyone who is made an offer to purchase the securities, must have access to the prospectus.