The contents of a prospectus have to be in accordance with the provisions of the Companies Act and with which of the following?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → SEBI disclosure and investor protection guidelines
Option (1) The Securities Contracts (Regulation) Act — Incorrect. This Act is used to define a stock exchange. It does not lay down what a prospectus must contain.
Option (2) The listing requirements of the stock exchanges — Incorrect. An issue through a prospectus must be listed on at least one stock exchange. That is a condition on the issue. The contents of the prospectus follow SEBI guidelines.
Option (3) SEBI disclosure and investor protection guidelines — Correct. A prospectus asks the public for money, so investors need full and honest facts. Its contents must follow the Companies Act and SEBI disclosure and investor protection guidelines.
Option (4) The rules of the depository and its participants — Incorrect. A depository and its participants hold and transfer securities in electronic (demat) form. They play no part in preparing a prospectus.
NCERT (Pre-rationalised Edition): “1. Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. The issues may be underwritten and also are required to be listed on at least one stock exchange. The contents of the prospectus have to be in accordance with the provisions of the Companies Act and SEBI disclosure and investor protection guidelines.” |