The common name for a preliminary prospectus, due to the red SEC required legend on the cover. (See also: Prospectus.)³

The act a broker/dealer makes with an investor to confirm a transaction.³

The reorganization of a company’s capital structure. A company may seek to save on taxes by replacing preferred stock with bonds in order to gain interest deductibility. Recapitalization can be an alternative exit strategy for venture capitalists and leveraged-buyout sponsors. (See also: Exit Strategy and Leveraged Buyout.)³

Qualified professional asset manager as defined by ERISA.³

The right to sell a security at a given price (or range) within a given time period.³

• A company that has securities that have been sold in a registered offering and that are traded on a stock exchange or NASDAQ. Must be a Reporting Company under SEC rules. Often used incorrectly to describe companies that are only Reporting Companies and that have not conducted a registered offering under Securities Act.³
• Under SEC rules, a company that decides to go “public” offers their securities (stock, bonds, liabilities) to be sold in a registered public offering. Through the sale of such assets, a corporation can raise capital for their company, employees, or executive staff. These public offerings are often traded on a stock exchange.⁴

A formal written offer to sell securities that provides an investor with the necessary information to make an informed decision. A prospectus explains a proposed or existing business enterprise and must disclose any material risks and information according to the securities laws. A prospectus must be filed with the SEC and be given to all potential investors. Companies offering securities, mutual funds, and offerings of other investment companies including Business Development Companies are required to issue prospectuses describing their history, investment philosophy or objectives, risk factors, and financial statements. Investors should carefully read them prior to investing.³

A legal document under which the borrower, (maker of the note) commits to re-pay the lender, (holder of the note) the principal amount owed as represented by the note.  This legal document,  or contract between the maker and the holder typically includes terms depicting agreed details related to the arrangement, including among other items, interest rates, reporting requirements and maturity dates.⁶

Private securities are securities that are not registered and do not trade on an exchange. The price per share is set through negotiation between the buyer and the seller or issuer.³

Also known as an Offering Memorandum. A document that outlines the terms of securities to be offered in a private placement. Resembles a business plan in content and structure.³