Series 63 practice questionhardCivil Liabilities — Seller's Defense for Fraud
In a state-administrator case study, the scenario starts here. Assume the administrator is testing the cleanest state-law answer. An agent is sued for making material misrepresentations during the sale of a registered security. Under the USA, the agent may avoid liability by proving that:
- AThe client is a sophisticated investor who should have known better
- BThe misrepresentation was made verbally rather than in writing
- CThe client made a profit on the transaction despite the misrepresentation
- DThe agent did not know, and in the exercise of reasonable care could not have known, of the misrepresentation✓ Correct answer
Explanation
Why D — The agent did not know, and in the exercise of reasonable care could not have known, of the misrepresentation
Under USA Section 410(b), a seller has an affirmative defense to a fraud-based civil liability claim if the seller can prove that they did not know, and in the exercise of reasonable care could not have known, of the untruth or omission. This is sometimes called the "due diligence" defense. The governing USA principle is unchanged even though the framing is different.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 646+ Series 63 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Remedies & Administrative Provisions questions
- In a state-law practice set, a candidate reviews the following scenario. Read it as a Uniform Securities Act issue…
- For a licensing checkpoint quiz, treat the following as the opening fact pattern. Assume the administrator is testing…
- For a mock NASAA exam, assume the administrator is testing this exact point. Read it as a Uniform Securities Act issue…
- During a registration workshop, the instructor adds this setup first. Assume the administrator is testing the cleanest…