(Reuters) -Companies looking to sidestep disruptions caused by the U.S. government shutdown to their initial public offerings can tap a provision that allows them to press ahead with their listing plans without the need for regulatory approvals.

Biotech startup MapLight became the first company to file for a listing under the provision late on Monday.

The U.S. market regulator has halted IPO reviews as the shutdown enters its second week.

WHAT HAPPENS TO THE SEC DURING A GOVERNMENT SHUTDOWN?

According to its contingency plan, the U.S. Securities and Exchange Commission has furloughed over 90% of its staff, retaining around 390 employees to handle critical enforcement actions and market monitoring.

The agency, which oversees the public markets, will not process IPO filings during the shutdown, a move analysts say could stall momentum in a market recovering from a years-long slump.

However, a provision under federal securities law allows companies to move ahead with IPOs without SEC review during the shutdown.

WHAT IS THE 20-DAY REGISTRATION RULE FOR IPOS?

While companies typically wait for the SEC's approval before launching their IPOs, the rules provide a mechanism that allows issuers to declare their own registrations "effective."

Issuers are required to set their IPO price 20 days before the listing, instead of finalizing it the night before, as is customary.

During the 2018 U.S. government shutdown, which lasted 35 days and was during Donald Trump's first presidential term, several issuers attempted this option, including biotechnology firm Gossamer Bio and energy company New Fortress Energy.

It was also a popular option among so-called special purpose acquisition companies.

SPACs raise money through an IPO to fund future acquisitions. At the time of listing, they are blank-check companies with no existing operations or assets. Their valuation is tied entirely to the cash raised, which allows them to set an IPO price in advance without deterring investors.

WHAT ARE THE RISKS FOR ISSUERS AND INVESTORS?

While the 20-day rule provides a way for companies to go public during a shutdown, bypassing the SEC review carries risks for both issuers and investors.

Without the agency's oversight, registration statements are more prone to errors or missing disclosures, which could expose companies to legal action or investor complaints after listing.

Companies may face greater scrutiny from investors, who often rely on the SEC's review to verify the accuracy and completeness of disclosures. To reduce that risk, many issuers work closely with legal and financial advisers to carry out detailed internal reviews of their filings.

Skipping regulatory reviews can also alienate investors, who may view the lack of regulatory vetting as a sign of higher risk or insufficient transparency.

WILL MORE COMPANIES TAKE THIS ROUTE?

Analysts say companies could rely on the 20-day registration rule if the shutdown looks set to drag on amid the ongoing deadlock in Congress.

"Biotech companies are prime candidates for this unconventional but valid way to go public during a shutdown as their high cash-burn rates often create an urgent need for funding," said Lukas Muehlbauer, research analyst at IPO research firm IPOX.

Some firms may also withdraw IPO filings and seek capital in private markets while waiting for the SEC to resume reviews.

(Reporting by Manya Saini in Bengaluru; Editing by Anil D'Silva)