Series 79 practice questioneasyDue Diligence Defense
Which of the following best demonstrates an underwriter’s exercise of reasonable investigation for a due diligence defense?
- ARelying solely on the issuer’s management presentations
- BIndependently verifying key financial data and material contracts✓ Correct answer
- CAccepting the issuer’s draft registration statement without review
- DRelying only on press releases from the issuer
Explanation
Why B — Independently 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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