Question

What is shelf registration? How does it differ from the traditional requirements for security offerings?

Short answer

In shelf registration, the issuing company publishes a comprehensive statement containing the firm's plans associated with long-term financing.

The major difference between shelf registration and traditional security offerings is the invention of Securities and Exchange Commission.

Step-by-step solution

Traditional offerings 

Traditional offerings are the process of collecting funds from outsiders. It is usually initiated by Initial Public Offering(IPO).

A company issues IPO to raise capital from external sources for the first time.

Shelf registration 

Shelf registration refers to issuing a comprehensive statement by the issuing company in which it states the firm's long-term plans for the coming two years.

Difference in traditional requirements and shelf registration 

In case of shelf registration, the company must file reports quarterly and annually with the Securities and Exchange Commission.

On the other hand, in traditional security offerings, a company must take approval from the Securities and Exchange Commission every time before offering its securities.