Agents of broker-dealers must provide which document when selling to potential investors?

When agents of broker-dealers are selling securities to potential investors, they are required to provide a prospectus. A prospectus is a comprehensive document that outlines the details of an investment offering, including the nature of the investment, associated risks, financial statements, and company management information. Its primary purpose is to provide potential investors with crucial information so they can make informed decisions about whether to invest.

The requirement for a prospectus stems from the need to promote transparency and protect investors from potential misinformation or misunderstandings about the investment products being offered. This aligns with securities regulation rules that mandate disclosure to provide potential investors with a clear picture of what they are considering.

In contrast, a confirmation statement is issued after a transaction to confirm the details of the trade, regulatory filings serve compliance and reporting purposes for the issuing entity, and performance reports showcase how specific investments have performed over a given period—they are not intended for initial sales and do not replace the obligation to provide a prospectus when making a sale.