Series 79 practice questionmediumProspectus Requirements
A company’s prospectus omits a material fact that investors would likely consider important. Under Section 12(a)(2) of the Securities Act, which party is most likely to be held liable?
- AThe underwriter who offers or sells the security✓ Correct answer
- BThe transfer agent
- CThe stock exchange
- DThe company’s independent auditor
Explanation
Why A — The underwriter who offers or sells the security
Section 12(a)(2) imposes liability on parties that offer or sell securities by means of a materially misleading prospectus. The trap is thinking other agents or exchanges are directly liable under this section.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Underwriting & New Financing questions
- Which of the following is a volume limitation under Rule 144 for an affiliate selling stock of a public company?
- Which of the following best describes how an underwriter uses the green shoe (overallotment) option in an equity…
- Which SEC form is typically used for the initial public offering (IPO) of equity securities by a U.S. company?
- A reporting company’s affiliate has held restricted shares for 8 months and wants to sell them under Rule 144. The…
- An issuer that is eligible for short-form registration wants to register a follow-on offering after its IPO. Which form…
- An affiliate of a public company wishes to sell shares in reliance on Rule 144. Which of the following requirements…
- In book-building for an IPO, which allocation practice could expose an underwriter to regulatory scrutiny for spinning?
- A company seeks to raise $10 million through a private placement under Rule 506(c) of Regulation D. They intend to…