What is the main purpose of a prospectus supplement?

What is the main purpose of a prospectus supplement?

• A. To introduce new management policies
• B. To update the information on previously sold securities
• C. To provide additional details about the securities being offered
• D. To summarize company earnings reports

Answer: (C)

The main purpose of a prospectus supplement is to provide additional details about the securities being offered. A prospectus supplement typically accompanies a base prospectus and serves to enhance the information provided initially. This can include updates about the terms of the offering, changes in the issuer’s strategy, or specific details regarding the securities that are relevant for investors evaluating the investment opportunity.

By including extra insights and clarifications, the prospectus supplement helps investors make informed decisions based on the most current and comprehensive information available, ensuring compliance with regulatory requirements and providing transparency in the securities market. This function is vital for maintaining investor trust and ensuring that all pertinent information is disclosed to potential buyers.