General Securities Sales Supervisor (Series10) Practice Exam

What is the prospectus delivery requirement for an IPO of a Pink Sheet stock?

1. Must be provided within 25 days of the effective date

2. Must be provided within 40 days of the effective date

3. Must be provided within 90 days of the effective date

4. No prospectus is required

The correct answer is: Must be provided within 90 days of the effective date

The correct answer regarding the prospectus delivery requirement for an IPO of a Pink Sheet stock is that it must be provided within 90 days of the effective date. This is significant because Pink Sheet stocks, which are traded over the counter and do not meet the listing requirements of major exchanges, are subject to specific regulatory requirements to ensure investor protection. The 90-day period allows issuers enough time to distribute prospectuses to potential investors following the effective date of the registration statement. This requirement is in place to provide investors with essential information about the offering, helping them make informed investment decisions. This delivery requirement is particularly important because Pink Sheet stocks often carry a higher risk profile due to their less stringent reporting and regulatory standards. Therefore, the extended time frame ensures that investors have adequate access to crucial information regarding the company's financial health and the nature of the investment.