Series 79 practice questionmediumDue Diligence Defense
Which of the following most accurately describes the due diligence defense available to underwriters under Section 11 of the Securities Act?
- AIt is a complete defense for issuers
- BReasonable-investigation defense✓ Correct answer
- CIt is available only to company insiders
- DIt is not available for follow-on offerings
Explanation
Why B — Reasonable-investigation defense
Underwriters can assert a due diligence defense by proving they conducted a reasonable investigation and had reasonable grounds to believe the registration statement was accurate. This is not a defense for issuers, nor is it limited to insiders or only for IPOs.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Underwriting & New Financing questions
- In a firm commitment underwriting, if a syndicate member defaults on its obligation to purchase shares, who is…
- In an IPO, what is the maximum price at which underwriters may stabilize the stock in the aftermarket under Regulation…
- Which statement is true regarding the volume limitations for affiliate sales of stock under Rule 144?
- A non-affiliate of a reporting company owns restricted stock and wants to sell after holding it for 7 months. Which is…
- Which type of follow-on offering allows the issuer to sell shares at prevailing market prices over time, rather than at…
- Which of the following is a basic eligibility requirement for an accredited investor under Regulation D?
- A company wants to broadly advertise its private offering and sell only to accredited investors. Under which rule may…
- An affiliate wants to sell restricted stock of a public company under Rule 144. The company has not filed required…