To protect investors, the Securities and Exchange Commission (the SEC) requires that companies file a registration statement with them before they issue public offering shares. This registration statement contains detailed information about the issuing company and its business. The Securities Exchange Commission will review the registration statement and an accompanying prospectus to ensure that they conform to certain legal requirements. Once the SEC has reviewed these documents, the issue can be cleared for sale. (The SEC will neither approve nor disapprove an issue, nor will it guarantee the accuracy of disclosures; it will only clear it for sale.)
Only when the issue has been cleared for sale (when registration has become “effective”) can the shares be priced and firm orders for them are accepted. The SEC is part of the US procedure, but the process in Canada is very similar. One snag Canadian business would like to see changed is a move to a more uniform system such as the US has deployed. Presently, provincial legislation governs securities and the premier jurisdiction is the Ontario Securities Commission (the SEC equivalent) which administers and enforces the legislation. Ontario is home to the TSX and TSX Venture markets so most IPOS go through the Ontario Securities Commission to gain approval. Thanks mainly to mining stocks and the Vancouver Exchange, British Columbia is also a very active jurisdiction.
The guideline most companies follow is to conform to SEC requirements because they may one day wish to trade on a US market, and in so doing, the stringent US filings will meet or surpass most Canadian disclosure demands.