Series 79 practice questioneasyDue Diligence Defense
Which of the following is a key element for establishing an underwriter’s due diligence defense under Section 11 in a registered offering?
- AObtaining a written statement of accuracy from the issuer's CFO
- BConducting a reasonable investigation of the facts in the registration statement✓ Correct answer
- CParticipating in every investor meeting
- DRelying solely on the company’s legal counsel
Explanation
Why B — Conducting a reasonable investigation of the facts in the registration statement
A reasonable investigation is necessary for the due diligence defense; simply obtaining statements or relying on legal counsel is not enough. The trap is believing a single document or outside party can substitute for a full investigation.
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