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

Which of the following best demonstrates an underwriter’s reasonable investigation for due diligence purposes in a registered offering?

  1. ARelying solely on the issuer’s management representations
  2. BPerforming no independent research but reviewing the prospectus
  3. CReviewing internal controls, financial statements, and interviewing key officers✓ Correct answer
  4. DDistributing the red herring prospectus to institutional investors
Explanation

Why CReviewing internal controls, financial statements, and interviewing key officers

A reasonable investigation involves reviewing financials, internal controls, and interviewing management. Simply relying on management or distributing materials is insufficient, which could leave underwriters vulnerable to liability.

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