12.4.4 Final Prospectus

Final Prospectus

A final prospectus must contain complete details of the securities being offered for sale. It provides the required full, true, and plain disclosure of all material facts relating to the securities to be distributed. This document is pivotal as an investor evaluating the potential purchase decides whether to complete the transaction based solely on the information contained in the prospectus.

Key Terms and Definitions

• Material Fact: Information that significantly affects the market price or value of the securities.
• Preliminary Prospectus: A document given to potential investors before the final prospectus, subject to change or amendment.
• Underwriting Discount: The difference between what the underwriters pay to buy the securities from the company and the price at which they sell them to the public at the offering price.
• ‘Blue Skyed’: A term indicating that the issue is legally approved for the public offering by regulatory bodies.

Regulatory Compliance

A final prospectus must be accompanied by the written consent of experts whose reports or opinions are referred to. Such experts can include appraisers, auditors, or lawyers. Regulators will review the documents meticulously and may require changes before granting final approval.

Once approved, the issue is ‘blue skyed’, and the securities may then be legally distributed to the investing public.

Delivery Requirements

A copy of the final prospectus must be mailed or delivered to all purchasers of securities no later than midnight on the second business day after entering into a purchase agreement. This ensures that the purchaser’s final decision is based on the final prospectus rather than the preliminary one.

Details of an Offering

The information must be presented in narrative or tabular form to be easily comprehensible by prospective investors. This allows them to make informed decisions based on the data provided.

1. Cover Page Disclosure

The cover page includes relevant details such as the value of the offering, stakeholder payments, and whether the prospectus is preliminary or final.

2. Summary

The summary highlights crucial information that may influence the investor’s decision to purchase the securities, featuring details that appear elsewhere in the prospectus.

3. Information Relating to the Issuer

This includes the name and business of the issuer, selected financial information, capital structure, recent facts, and trends that could materially impact the business.

4. Information Relating to the Securities

Details about the type of product, use of proceeds, distribution method and eligibility of investment, as well as a detailed description of the securities, are provided.

5. Information Relating to Officers and Shareholders

Names and addresses of directors and officers, five-year histories of principal occupations, shares owned, and data about executive compensation, indebtedness, bankruptcies, cease-trade orders, securities regulatory violations, and prior sales of the securities being offered.

6. Information Relating to the Parties Involved

The prospectus contains representations, declarations, and certificates from parties involved in a securities issuance. Specifically:

• Certificate by Issuer: States full, true, and plain disclosure signed by the issuer’s CEO, CFO, two board directors, and any promoters.
• Certificate by Underwriters: States full disclosure, signed by the underwriters and based on their knowledge, information, and belief.Detailing It binds them legally to the facts mentioned in the prospectus.

Market Out Clauses

A market out clause allows the underwriter to cancel an offering without penalty under specific conditions; for example, if the issue becomes unsaleable due to changes in market conditions or issuer affairs. Disclosure of market out clauses and any conditions therein is mandated on the cover page and referenced to the detailed Plan for Distribution section in the prospectus.

Key Takeaways

• A final prospectus ensures the full, true, and plain disclosure of all material facts about the securities being offered.
• Delivery of the final prospectus must occur no later than the second business day after the purchase agreement.
• Market out clauses safeguard underwriters but must be fully disclosed.
• Compliance with regulatory requirements mandates written consents from experts and thorough documentation.

Frequently Asked Questions (FAQs)

• Q1: What is the main purpose of a final prospectus? A1: The main purpose is to provide comprehensive, accurate information to potential investors, allowing them to make informed decisions.

• Q2: Why are material facts important in a final prospectus? A2: Material facts significantly affect the market price or value of securities, influencing investor decisions.

• Q3: What is the meaning of securities being “blue skyed”? A3: