Chapter 4 Practice Questions
- 1. “Bring-down due diligence” is best described as which of the following?
- A. Due diligence undertaken by outside auditors, intended to confirm the accuracy of the company’s financial statements
- B. Due diligence undertaken by outside lawyers, intended to confirm that company management has observed corporate formalities and that legal records are in order
- C. Due diligence undertaken before agreeing to be retained by a potential customer, intended to avoid potential conflicts of interest
- D. Due diligence undertaken before finalizing a registration statement, intended to confirm that prior information is still valid
- 2. In a merger or acquisition, which of the following is a due diligence task normally performed by a sell-side advisor but not a buy-side advisor?
- A. Performing due diligence on the seller
- B. Evaluating the seller’s leadership team
- C. Monitoring access to the data room
- D. Coordinating site visits
- 3. Which of the following is not a “relevant circumstance” to consider under Rule 176 to determine whether a person involved in an offering has made a “reasonable investigation” or has a “reasonable ground for belief” for purposes of asserting a due diligence defense to liability?
- A. For an issuer, whether the issuer could reasonably have learned of a misstatement in a registration statement
- B. For an underwriter, what type of underwriting arrangement the underwriter has with the issuer
- C. For an ind