The SEC was established by Congress to regulate securities markets with the intent of protecting investors. For this reason, it requires registration for the issuance of almost any kind of securities, including mail or internet-based issues.

In an initial public offering, the process of filing necessary paperwork with the SEC can be time-consuming and complicated. First, a registration for must be filed and declared effective. Despite the fact that the registration becomes public knowledge immediately, the company may not attempt to sell shares until the registration is declared effective. Registration documents include a prospectus to be given to all investors, as well as a section that is made available on the SEC website but which does not have to be provided to investors. A company's underwriter will prepare and file these documents with the help of accountants and lawyers.

For a company that has gone public through an IPO, SEC requirements don't end with the issuance of shares. Continued disclosures must be made concerning a variety of topics, including details of operations, key employees and shareholders, major stock transactions, and general health of the company. Because these disclosures are so numerous and frequent, there is a substantial cost involved that should not be overlooked when making the decision to go public.

Despite the expense of SEC compliance, the cost of issuing stock would be higher without the SEC. Because of SEC regulations, a large pool of information is available to potential investors. Further, many otherwise unethical businesses are given good motivation to avoid misrepresentation on company financial documents. This makes investing safer for everyone, and allows investors to trade with less prejudice at higher prices.

For smaller businesses, the process of issuing shares is less complicated. Shortened forms and procedures allow businesses seeking smaller amounts of capital to publicly sell shares without the use of an underwriter. These rules also allow slightly reduced reporting requirements, as compared to companies going public through an initial public offering. The overall effect is a public issuance that costs significantly less than the traditional process for going public.

More recent SEC rules also allow for the public trading of direct public offerings issued by those small companies. With the appropriate filings in place, small companies can apply to have their shares traded on over-the-counter bulletin board exchanges, giving added liquidity to their offerings. In this manner, the SEC has helped to encourage small business and innovation by democratizing the availability of capital.

Despite the often negative opinions about the SEC and its requirements, it is an organization that acts in the best interest of investors and for the overall good of the market. Proper attention and diligence can ensure that an offering goes smoothly in spite of the inconvenience of necessary filings.