The preliminary prospectus, which may be distributed to the public during the waiting period for the registration of the security to become effective, is referred to as:
A) Red warning.
B) Red herring.
C) Initial prospectus.
D) Interim offering.
E) None of the above.

Question

Quizplus · Accepted Answer

The preliminary prospectus distributed to potential investors during the waiting period before a security's registration becomes effective is commonly referred to as a "red herring." This document contains most of the details of the business and the upcoming offering, except for the final price and share quantity. The term "red herring" comes from the red warning printed on the cover, indicating that the document is not an offer to sell or a solicitation of an offer to buy.

The Preliminary Prospectus, Which May Be Distributed to the Public