In Trouble

In Trouble.Bruno,an issuer of stock,may be in trouble.He sold stock in a new health club venture before the effective date of registration.He did so because he was in financial trouble involving other ventures of his and needed additional funds.Bruno thought that the health club venture would be such a success that he would never get caught in regard to the stock sale.Unfortunately,he was wrong.The health club venture was going very poorly and investors were looking for some way to hold Bruno responsible.Another problem Bruno has is that he inflated information regarding the prospects of the health club in the prospectus.Investors bitterly complained.Rick,a new lawyer,told Bruno that as far as he knew,the Securities and Exchange Commission (SEC) could fine Bruno under the Securities Act of 1933 but could not send him to jail.Bruno told Rick that was good news and that no one should feel sorry for the investors because none of them made any effort to check on information contained in the prospectus or to investigate the future profitability of the health club venture.Bruno says that he plans to rely on the due diligence defense.Bruno also asks Rick if he is aware of any other defenses.Bruno says that he has never previously been in trouble with the SEC.Which of the following is true regarding Bruno's plan to rely on the due diligence defense with regard to all charges?

A) He will be able to do so if he can establish that the purchasers would have had reasonable grounds to question the registration statement had they reviewed it with due diligence.
B) He will be able to do so if he can establish that the purchasers would have had reasonable grounds to question the prospectus had they reviewed it with due diligence.
C) He will be able to do so if he can establish that the purchasers would have had reasonable grounds to question either the registration statement or the prospectus had they reviewed them with due diligence.
D) He will not be able to use that defense unless he can establish that he reviewed the registration statement and the prospectus,and had reasonable grounds to believe that the registration statement was accurate and had no omission of material facts.
E) He will not be able to rely on that defense because he is an issuer.