Why must an investment bank underwrite an IPO, not a company's finance department led by the CFO?

It is not about guidelines - it is about setting up a pool of investors and financing the operation. A company in an IPO situation is not necessarily in the financial situation to handle all the costs. They also would have anyway to get outside help in - because the knowledge is not something a normal CFO underlings will have. See, companies do not do IPO all the time for themselves - they do it ONE TIME. Investment banks do it all the time.

The IB is basically putting together a pool of investors and - often - financing a part of the IPO themselves. The company can not really do it. And then there is the marketing - a good part is "because this is how it is done". Another part is that large investors / investment funds do not want to deal with unvetted companies. The investment bank deals as a separate legal check that the paperwork is in order.

Taking a company public is no small feat, aka like merely an interaction with a bureaucracy like say.. renewing your passport or getting an apostille on a document. Per this article, it takes an investment bank about 3 months to perform the due diligence and regulatory filings and about 6 months to complete the IPO. Multiple forms and documents must be accurately completed and be reviewed by the SEC for approval:

• Engagement letter
• Letter of intent
• Underwriting agreement
• S-1 Registration statement
• Red herring document

After all of the paperwork has been completed, the company prospectus (a report of the company’s financial history and projected growth) is filed to the SEC. Then, an investigation is conducted by the SEC to confirm that there aren’t any reasons for the issuing company to be rejected.

An investment bank is usually hired to guide the issuing company through this process. The bank will also provide the company with a team of underwriters, comprised of lawyers, certified public accountants, public relations experts, and SEC (Securities & Exchange Commission) professionals. The underwriting team’s job is to make sure that the IPO is successfully completed and that the stocks are sold at the appropriate price as well as price stabilization once the company goes public.

So while some companies do Direct Listings, I suspect that it's more efficient and effective to use an investment bank versus winging it yourself.