The rules pertaining to prospectus requirements are contained in the Securities Act of 1933. The prospectus requirement is set in place to protect the public against fraud. The SEC review process takes up to 2 months, during which time the company’s attorneys are in contact with the SEC to make any necessary changes to the prospectus, and the company’s financial statements are independently audited to ensure compliance with the SEC rules.
During the SEC review period the company and its investment bank distribute the preliminary prospectus and carry out a road show to market the sale of the company’s shares to potential investors.
After the prospectus has been approved, the company’s offering date is finalized, which is supposed to become effective 20 days after the final amendments to the prospectus are filed with the SEC. It is possible that the SEC may grant an acceleration so that the sale of share becomes effective immediately.