Delivery of a Prospectus
Another important part of the disclosure process is delivery of the prospectus to interested investors after the initial offering. To ensure that broker-dealers live up to their obligations with regard to prospectus delivery, the SEC has established the following guidelines.
Prospectuses must be given for new issues. After an issue is no longer considered to be new, the SEC assumes that there is enough information out in the market for investors to make informed decisions, and the prospectus is no longer required.
What is considered a new issue? A stock that has just had an IPO. So if Facebook, for example, goes public, and you buy shares shortly after the IPO, you will be given a prospectus. For stocks that go public on an exchange like the NYSE or the NASDAQ, the prospectus has to be given to anyone who buys up to 25 days after the IPO (after that, it is no longer considered a new issue). For stocks that go public over the counter, the prospectus has to be given for up to 90 days after the IPO. There is a difference between the exchanges and the OTC market because the SEC assumes that there will be more information available about companies that go public on an exchange than about companies that sell over the counter.
What else is considered a new issue? A mutual fund or variable annuity also requires a prospectus. This