Updated on March 9, 2023
Whenever a company is in the process of offering securities to the public, it has to issue a ‘Prospectus’, which is a mandatory disclosure document before issuing such securities. The prospectus provides detailed information to potential investors about the issue, which can be for stocks, mutual funds, bonds or other investment offerings. A prospectus has to be first filed with the Securities and Exchange Board of India for approval.
Information contained in Prospectus
While coming with an IPO or issuing a mutual fund through NFO or for other similar instruments for investment to the public, the issuing company or fund house provides detailed information covering various aspects, including:
Objectives of the investment
Type of security offered (Mutual fund, bond, stocks, etc)
Issuing company’s details, financial information, fundamentals
Risks, Distribution policy
Number of shares issued
Expenses (including all kinds of fees/charges)
Fund Management details
Names of Key Persons with qualification, experience and education.
Where to check the Prospectus
The prospectus of a new issue, mutual fund, stock or bond can be checked from a broker, company website, financial websites (where available), Mobile App or other certified, registered financial professionals/intermediaries.
Importance of Prospectus
a) All the essential information related to the investment and the potential risks are available in the Prospectus.
b) The importance of studying financials is paramount and thus any decision related to the investment should be based on a careful analysis of financial information shared in the Prospectus.