Series 79 practice questionmediumDue Diligence Defense
Which of the following actions best supports an underwriter’s Section 11 due diligence defense in a registered offering?
- AAccepting all management statements as fact without independent verification
- BRelying solely on the issuer’s legal counsel for disclosures
- CReviewing board minutes, business contracts, and interviewing key management personnel✓ Correct answer
- DDelegating all due diligence tasks to junior bankers only
Explanation
Why C — Reviewing board minutes, business contracts, and interviewing key management personnel
A robust due diligence process requires reviewing documentation and conducting interviews, not just passively accepting information. The trap is thinking reliance on others alone or delegation is adequate for a Section 11 defense.
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