• Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe the fund objectives, risks and other essential information.
• A portion of a security registration statement filed with the provincial securities regulator that details the firm's operating and financial position, the terms and conditions relating to the proposed security offering and any other information that could materially affect the value of the securities; it must be made available to all potential buyers.
• A detailed statement prepared by an issuer and filed with the SEC prior to the sale of a new issue. The prospectus gives detailed information on the issue and on the issuer's condition and prospects.
• A formal written statement that discloses the terms of a public offering of a Security or a Mutual Fund. The prospectus is required to divulge particular essential information to investors about the proposed offering.
• Is the formal or official document which presents financial condition, key employees and management, and the purpose of the organization. It accompanies an Initial Public Offering or Mutual Funds transactions.
| ||Embedded terms in definition|
| ||Initial public offering|
| ||Referenced Terms|
| ||12b 1 fees: The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's Prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true no load fund has neither a sales charge nor 12b-1 fee.Are charges assessed against an individual's mutual fund holdings for marketing and distribution expenses.A provision of the Investment Company Act of 1940 that allows a Mutual Fund to collect a fee for the promotion, sale, or other activity connected with the distribution of its shares. The fee must be reasonable (typically 1/2 to 1% of net assets managed), up to a maximum of 8.5% of the offering price per share.|
| ||Back end load: A sales charge or commission for an investment paid by the buyer at the time of sale.Refers to charges which are imposed upon the redemption or liquidation of an investment position. Often these charges are on a sliding scale. Sometimes, these charges are viewed as early withdrawal penalties. They are called backend because they occur at the end of the investment process.A commission or sales fee that is charged upon the redemption of Mutual Fund shares or Variable Annuity contracts. It declines annually, and reaches zero over an extended holding period -- up to eight years -- as described in the Prospectus. See also: Front-End Load; Contingent-Deferred Sales Load.|
| ||Blue skying: An investment industry term referring to the approval of the final Prospectus by provincial securities commissions.|
| ||Collateralized mortgage obligation: Is a complex bond structure which reallocates interest and principal payment streams. These tranches, which are often designated as A to Z pieces or securities, are engineered from mortgage backed securities used as the underlying collateral. Collateralized Mortgage Obligations come in many shapes and sizes and are often viewed as unique constructions. Some of the more commonly named tranches are: Interest Only, Principal Only, Floater, Inverse Floater, Planned Amortization Class, Support, Scheduled, Sequential, Targeted Amortization Class, and Z or Accrual Bond. Often, many of these securities contain option characteristics. Related structures are Collateralized Bond Obligations and Collateralized Loan Obligations.Abbreviated CMO. A security backed by a pool of pass-throughs, structured so that there are several classes of bondholders with varying maturities, called tranches. The principal payments from the underlying pool of pass-through securities are used to retire the bonds on a priority basis as specified in the Prospectus. Related: mortgage pass-through securityA Collateralized Mortgage Obligation (CMO) is a vehicle that repackages the cashflows in a way that redistributes prepayment risk.|
| ||Comprehensive due diligence investigation: The investigation of a firm's business in conjunction with a securities offering to determine whether the firm's business and financial situation and its prospects are adequately disclosed in the Prospectus for the offering.|
| ||Related Terms|
| ||Final prospectus|
Prompt offering prospectus pop system
Short form prospectus