What is an 'Offering Circular'

An offering circular is a prospectus for a new security listing. It is delivered to individuals and brokerage houses who are interested in potentially purchasing the newly issued mutual fund or stock. It may be slightly abbreviated from the final, long-form prospectus, but is still required to contain specific information. Offering circulars are required to contain certain pieces of information that are meant to be helpful to a prospective investor in deciding whether or not the investment is suitable for their interests. This information includes items such as the issuer of the security, the objective of the mutual fund or the purpose of the stock issue, the terms of the issue, and any additional information that could be helpful to a prospective buyer.

An offering circular should not be confused with a red herring or preliminary prospectus. The preliminary prospectus, or red herring, is issued during the IPO process and is intended to generate interest in the new issue. It lacks many of the specifics regarding the new issue. The offering circular is a more complete document and should be viewed before making a final decision about an investment.

BREAKING DOWN 'Offering Circular'

An offering circular allows investors to access information regarding a new issue. It provides them with very important information about the security such as financial information about the issuer, the objective of the fund or purpose of the funds being raised, and other terms of the security issuance. The offering circular is a legal document and is a requirement for many, but not all, new issues. It is important to distinguish it from the red herring, or preliminary prospectus, which lacks significant details about the new issue. The red herring is a promotional item passed out to potential investors early on in the IPO process to solicit indications of interest and does not include the crucial information that an investor should review before purchasing a security. However, this important information is included in the offering circular.

RELATED TERMS
  1. Bond Circular

    A standardized legal document that contains an abbreviated version ...
  2. Information Circular

    A document sent to shareholders outlining important matters to ...
  3. Final Prospectus

    A final prospectus is the final version of a prospectus for a ...
  4. Prospectus

    A prospectus is a document delivered to potential investors that ...
  5. Preliminary Prospectus

    A first draft registration statement filed by a firm prior to ...
  6. Going Public

    Going public is the process of selling shares that were formerly ...
Related Articles
  1. Investing

    An Insight on the Prospectus of Corporate Bonds

    Making a well-informed decision with respect to buying a corporate bond involves reading the significant facts and details of the prospectus document.
  2. Investing

    The Advantages and Disadvantages of Mutual Funds

    As with most investments, mutual funds have both advantages and disadvantages.
  3. Investing

    Mutual Funds: Management Fees Vs. MER

    Having a clear understanding of the fees charged by a mutual fund is a significant component to making an informed investment decision.
  4. Investing

    SEC Filings: Forms You Need To Know

    The forms companies are required to file provide a clear view of their histories and progress.
  5. Investing

    How Much Company Stock Can a Mutual Fund Own?

    There is no written rule that stipulates how much of a company a mutual fund can own.
  6. Investing

    Rating Your Mutual Fund: Morningstar Vs. US News

    Learn about the differences in the mutual fund rating systems offered by Morningstar and U.S. News and some of the these websites' commonly used metrics.
  7. Investing

    Mutual Fund Fact Sheets: What You Need to Know

    Investors should read mutual fund fact sheets for the valuable information they contain.
  8. Financial Advisor

    Asset Manager Ethics: Rules Governing Capital Markets

    The integrity of the capital markets needs to be kept at utmost importance for all investors. This article shows how to maintain the integrity while investing.
  9. Financial Advisor

    How to Create a New Financial Product in 10 Steps

    The 10 steps outlined here are essential to the creation of a new financial product.
RELATED FAQS
  1. How does the Circular Flow Of Income model work?

    Learn about the circular flow of income model used by economists to represent the continuous, interdependent nature of money ... Read Answer >>
  2. How to Get a Company's Prospectus

    Obtaining a company's prospectus—or other financial documents—is now a simple online task. Read Answer >>
  3. What is the difference between a summary prospectus and an offering memorandum?

    Understand what investments require a summary prospectus or a offering memorandum, and learn the differences between the ... Read Answer >>
  4. What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in ... Read Answer >>
  5. Can I Find Out a Manager's Stake in a Mutual Fund?

    Sometimes mutual fund investors want to know how much a fund's management has invested in it. Read Answer >>
Hot Definitions
  1. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  3. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  4. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  5. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  6. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
Trading Center