Final answer:
A free writing prospectus must include a legend informing investors that it is not to be considered an offer to sell or a solicitation of an offer to buy securities, ensuring comprehension and compliance with legal standards.
Step-by-step explanation:
A free writing prospectus is a document associated with the sale of securities that gives potential investors information about the securities offered. One key piece of information that must be included in a free writing prospectus is a legend notifying investors about the nature and limitations of the document. More specifically, the legend should inform investors that:
This legend ensures clear communication with investors that the material they are reading does not serve as a legally binding offer. It is critical for the writers of these documents to use plain language, as mandated by securities laws and regulations like the Federal Securities Act and oversight by the Securities and Exchange Commission (SEC), to facilitate investor understanding. Indeed, brevity, clarity, and compliance with legal standards are paramount, especially for securities such as stocks and bonds that are offered to public investors through channels like initial public offerings (IPOs).