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Series 79: Underwriting & New Financing
Series 79 practice questioneasyDue Diligence Defense

Which of the following best demonstrates an underwriter’s exercise of reasonable investigation for a due diligence defense?

  1. ARelying solely on the issuer’s management presentations
  2. BIndependently verifying key financial data and material contracts✓ Correct answer
  3. CAccepting the issuer’s draft registration statement without review
  4. DRelying only on press releases from the issuer
Explanation

Why BIndependently verifying key financial data and material contracts

Underwriters must independently verify critical information, not just accept management’s word. Relying only on company statements or press releases is insufficient for a due diligence defense.

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