Series 79 practice questionmediumDue Diligence Defense
An underwriter’s investigation for due diligence purposes should include which of the following activities to establish a Section 11 defense?
- ARelying exclusively on management’s verbal assurances
- BAccepting unaudited financial statements without further inquiry
- CReviewing board minutes, visiting company facilities, and consulting independent experts✓ Correct answer
- DDelegating all compliance tasks to outside counsel without oversight
Explanation
Why C — Reviewing board minutes, visiting company facilities, and consulting independent experts
A comprehensive process involving document review, site visits, and expert consultation constitutes reasonable investigation. Sole reliance on management or delegation is insufficient for due diligence defense.
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