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A detailed statement by a corporation required when there is an issuance of stock to the general public. a prospectus includes the financial status, the officers, the plans, contingent obligations (such as lawsuits) of the corporation, recent performance and other matters which would assist the potential investor or investment adviser to evaluate the stock and the prospects of the company for profit, loss or growth. the federal securities act requires the filing of the prospectus with the securities and exchange commission and the sec’s approval before any major stock issue. state laws generally require similar documentation for some issuances or offers of sales of stock within the state. every potential purchaser of shares of a new stock shares must receive a copy of the prospectus, even though they are difficult to understand. offerings to the public of limited partnership interests may require that a prospectus be prepared and delivered to each investor.

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