Series 79 practice questionmediumDue Diligence Defense
In the context of a securities offering, which of the following most reduces an underwriter’s exposure to Section 11 liability?
- ADocumenting a thorough and independent investigation process✓ Correct answer
- BRelying on the issuer’s representations of accuracy
- COnly participating in offerings of well-known companies
- DObtaining insurance against litigation
Explanation
Why A — Documenting a thorough and independent investigation process
A documented, thorough, and independent investigation is the foundation of the due diligence defense. Relying on issuers' statements or insurance does not protect against Section 11 liability; even well-known companies can have disclosure issues.
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