Series 79 practice questionhardDue Diligence Defense
Which activity would most likely undermine an underwriter's due diligence defense in a registered offering?
- AReviewing all material contracts prior to filing
- BObtaining a comfort letter from the issuer's auditor
- CVisiting company facilities and interviewing management
- DFailing to follow up on red flags noted during the due diligence process✓ Correct answer
Explanation
Why D — Failing to follow up on red flags noted during the due diligence process
Ignoring red flags signals a lack of reasonable investigation, jeopardizing the due diligence defense. The other options are considered part of a robust diligence process.
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