Definition of Preliminary Prospectus / Red Herring

Preliminary Prospectus / Red Herring is a document used to solicit indications of interest during the cooling off period for a new issue of securities. All of the information in the preliminary prospectus is subject to revision and change. The cover of a preliminary prospectus must have a statement saying that the securities have not yet become registered and that they may not be sold until the registration becomes effective. This statement is written in red ink and that is where the term "red herring" comes from.

Applying "Preliminary Prospectus / Red Herring" to Securities Exams:

Preliminary Prospectus / Red Herring may be sent to potential investors by a registered representative during the cooling off period to determine the level of investor interest in an offering coming to market. Nothing else may be sent with the preliminary prospectus and no changes or marks of any kind may be made to or on the preliminary prospectus

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