Series 79 practice questionmediumDue Diligence Defense
An underwriter discovers a material misstatement in the registration statement after effectiveness. Which step is most appropriate to maintain a due diligence defense?
- ADo nothing, as the offering is effective
- BPromptly notify the issuer and take corrective action✓ Correct answer
- CRely on the initial investigation only
- DDelay notification until after the offering closes
Explanation
Why B — Promptly notify the issuer and take corrective action
Promptly addressing material misstatements and ensuring corrective disclosure are essential for maintaining a due diligence defense. Ignoring or delaying action undermines this defense and exposes the underwriter to liability.
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