A Defendant Using the Due Diligence Defense Against a Section

question 32

Multiple Choice

A defendant using the due diligence defense against a Section 11 violation must show all of the following EXCEPT:

• A) the defendant used experts' reports that had not been prepared for registration statements.
• B) the defendant conducted a reasonable investigation.
• C) the defendant reasonably believed that the statements made were true.
• D) the defendant reasonably believed that there were no omissions that made any statements misleading.

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Definitions:

Allowance Method

An accounting technique used to estimate and account for bad debts or uncollectible accounts receivable.

Bad Debts

Accounts receivable that a company considers uncollectible and writes off as a loss in its financial statements.

Sales

The transactions involving the exchange of goods or services for money.

Accounts Receivable Turnover

A financial metric that measures how many times a business collects its average accounts receivable amount within a period, indicating the efficiency of credit and collections.