In the United States, a registered company is a company that has filed paperwork with the Securities and Exchange Commission (SEC) to allow it to issue securities, such as stocks and bonds. Companies that want to offer securities must register in order to do so. Other companies required to register with the SEC include investment companies, such as mutual funds that offer financial products and financial advice to customers. Failure to register can subject a company to legal penalties.
In the initial SEC filing for registration, the company must provide a prospectus, detailed financial statements, and other information. This material is used by the SEC to confirm that the company is viable and that it is reporting information about itself accurately and completely. Once the application is approved, the company becomes a registered company, and it can make an initial offering of securities or engage in activities like administering investment accounts on behalf of clients.
To remain a registered company, the company must comply with SEC regulations and requirements. These include legal requirements pertaining to how the company does business, mandating that registered companies protect their investors and clients. In addition, companies must make regular public disclosures as mandated by the SEC, including detailed disclosures of their financial conditions. Company policies also must be publicly disclosed.
The requirements for a registered company are designed to ensure that companies are consistent and act with the benefit of their investors in mind. If companies could conceal their business activities and financial positions, this might create a situation where abuse or fraud could occur because members of the public could not scrutinize the company. Being registered also subjects companies to scrutiny from the SEC to confirm that they are complying with SEC regulations and acting appropriately.
Even with regulation, a registered company can outwit the SEC with its business practices. Regulations tend to lag behind trends in the financial community. It is possible for companies to engage in unregulated activities and incur financial damages without doing anything illegal or alerting the SEC, because the commission has no mechanism in place to monitor those activities. SEC regulators attempt to keep up with emerging trends in the financial industry so that they can create a regulatory framework that is effective, flexible, and not outdated.