Series 79 practice questionmediumDue Diligence Defense
Which of the following is NOT typically considered a sufficient step in an underwriter’s reasonable investigation for Section 11 liability purposes?
- AReview of legal compliance records
- BManagement interviews
- CIgnoring red flags noted during due diligence✓ Correct answer
- DAnalysis of financial statements
Explanation
Why C — Ignoring red flags noted during due diligence
Ignoring red flags undermines the due diligence defense, as underwriters are expected to thoroughly investigate concerns. The other steps are essential elements of reasonable investigation.
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