When must a preliminary prospectus be delivered to a potential purchaser?

A preliminary prospectus, also known as a red herring prospectus, must be delivered to potential purchasers 48 hours prior to the sale confirmation. This requirement is crucial because it allows investors adequate time to review the details of the security being offered before making a decision to invest.

This period is designed to ensure transparency and provide potential investors with key information regarding the investment, including risks and company financials. By adhering to this timeline, underwriters and issuers fulfill their regulatory obligations and uphold investor protection standards.

The other options do not align with the regulatory requirements. For example, 24 hours might not provide sufficient time for thorough review, while providing the prospectus after the agreement is signed or at the time the sale is initiated contravenes the obligation to inform investors adequately prior to their purchase decision. Giving notice too close to the sale or after the sale is confirmed undermines the intent of disclosure that the preliminary prospectus serves.