Series 79 practice questionmediumDue Diligence Defense
Which of the following actions best demonstrates an underwriter's due diligence in a public offering?
- ARelying solely on management’s representations
- BReviewing independent audit reports and conducting site visits✓ Correct answer
- CAssuming the issuer’s legal counsel verified all facts
- DDelegating verification to a junior analyst without supervision
Explanation
Why B — Reviewing independent audit reports and conducting site visits
Thorough due diligence requires independent verification, such as reviewing audit reports and performing site visits. Sole reliance on management or delegation without oversight does not satisfy the due diligence standard. Relying on counsel is also insufficient.
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