IFIC Mutual Funds Licensing Practice Exam · Question
Under which circumstances is a Preliminary Prospectus typically issued for a mutual fund?
A Preliminary Prospectus (also known as a 'red herring' prospectus) is filed when a new mutual fund is looking to launch and is in the process of seeking approv
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Question: Under which circumstances is a Preliminary Prospectus typically issued for a mutual fund?
Answer options:
- After the fund has been approved for sale by regulators. ✅ When a new mutual fund is being launched and is awaiting regulatory approval.
- Annually, as a summary of the fund's performance.
- Only to accredited investors.
Correct answer: When a new mutual fund is being launched and is awaiting regulatory approval.
Explanation: A Preliminary Prospectus (also known as a 'red herring' prospectus) is filed when a new mutual fund is looking to launch and is in the process of seeking approval from securities regulators. It contains most of the information of a final prospectus but is subject to change.
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