The omission of a material fact on a registration statement may be a violation of Section 11 of the Securities Act of 1933 unless the defendant utilizes the due diligence defense.

Question

Quizplus · Accepted Answer

This is true. Section 11 of the Securities Act of 1933 imposes strict liability on issuers of securities for material misstatements or omissions in registration statements. However, defendants in a Section 11 lawsuit may assert a due diligence defense to avoid liability, but they must show that they conducted a reasonable investigation and had reasonable grounds to believe that the statements in the registration statement were true and complete.

The Omission of a Material Fact on a Registration Statement