Introduction

The United States is home to the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq), the two largest stock exchanges in the world by market capitalisation and two of the most popular venues for initial public offerings (IPOs). A listing on a US exchange offers companies access to deep pools of capital from institutional and retail investors and can serve to attract investment from both US and global investors. The strength of the US capital markets relies on balancing a commitment to promote capital formation while implementing safeguards for investor protection through layers of regulatory oversight. In addition to the rules of the NYSE and Nasdaq, the IPO market in the United States is governed by the federal securities laws and the rules and regulations of the Securities and Exchange Commission (the SEC). The Financial Industry Regulatory Authority (FINRA), a self-regulatory organisation that writes and enforces rules for broker-dealer firms and brokers in the United States, also plays a role in promoting investor protection and market integrity in capital markets transactions.

The two principal statutes governing IPOs in the United States are the Securities Act of 9344 (the Securities Act) and the Securities Exchange Act of 934B (the Exchange Act). Both were passed by Congress in response to the US stock market crash of 93G3 and the resulting Great Depression. The federal securities laws of the United States provide a regulatory framework that is disclosure based. The goal of this framework is to ensure that prospective investors receive fulsome and accurate financial and other material information concerning the company and securities that are the subject of their investment decisions. Failures to comply with these rules and provide accurate and complete disclosures expose transaction participants to private causes of actions for recovery and risk federal enforcement actions. Prior to Congress enacting federal securities laws, individual states had their own securities laws, also known as blue sky laws. With their preemption by the federal securities laws, these blue sky laws typically do not factor into IPOs.

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