Series 79: Reasonable Investigation (Rule 176)

Reasonable Investigation (Rule 176)

Rule 176 under the Securities Act lists the “relevant circumstances” that should be considered in determining whether a person involved in an offering has conducted a “reasonable investigation” or has a “reasonable ground for belief” for purposes of asserting a due diligence defense. This defense is not available to the issuer, who is subject to strict liability for misstatements and omissions in a registration statement. These circumstances include:

• • The type of issuer
• • The type of security
• • The type of person
• • Whether an individual is an officer, and if so, what office the person holds
• • If the person is a director or prop