To raise funds for your business/company by offering shares to investors, you need to adhere to S.E.C. regulations
Soon after the Wall Street Crash of 1929, it was discovered that the crash had been caused by extensive misrepresentation of facts regarding investment, earnings potential, and deliberate market manipulation. As a result, a government department was organized and established to protect investors from fraudulent and intentional misrepresentation. Hence, in the United States under the Securities Act of 1933, any offer to sell securities must either be registered with the United States Securities and Exchange Commission (SEC) or meet certain qualifications to exempt it from such registration.
The so-called exemptions are a group of offering classifications (e.g. Regulation D, or Regulation A, etc.) whereby each of these offer a business or company a vehicle to raise capital from potential investors if they meet certain conditions. Under Regulation D (or Reg D, as it is called), companies cannot advertise and/or solicit investors. However, under Regulation A (updated to Reg A+), there is the ability to advertise and solicit investors publically.
Being able to advertise directly to the public is a huge benefit, since without advertising directly or soliciting investors to offer your shares for raising capital, it would be quite difficult to raise capital. Without advertising, you would have to raise money through people you already know (e.g. family members), and also meeting the condition (under Reg D) of having restrictions with regards to “accredited investors” that meet certain financial net worth limits.
Regulation A (Reg A, now called Reg A+), allows you to advertise publically and solicit investors.
You do have to meet certain conditions. But relatively, these are not a lot, AND you are not required to “register” the shares offered to public with S.E.C. – as public companies are required to do so. Registration of shares is quite a lengthy and costly process, requiring many additional steps, which is not often required if a small company needs to raise, say $5 million or $10 million.
It is worth mentioning here that in addition to the federal governing body (S.E.C.), there is also state law in the United States that regulates the offering and sale of securities by each state to protect the public from fraud. Each state has its own specific provisions of these “securities” laws and often they vary among states, which companies offering their shares need to adhere to if they wish to sell stocks/shares to the residents of each of these states.
Additionally, each of the states in the union may require the registration of all securities offerings and sales, as well as of stockbrokers and brokerage firms. Each state's securities laws is administered by its appropriate regulatory department or agency, and most also provide private causes of action for private investors who have been injured by securities fraud.
The state-specific laws governing securities in the states within U.S. is called the Blue Sky Law.