Disclosure Standard and Reasonable Investigation

What this video covers

• The two-prong disclosure standard: why an offering document triggers liability for either an untrue statement of material fact OR an omission of a material fact necessary to keep statements made from being misleading
• Why the exact same liability standard applies to public registration statements and private placement memoranda (PPMs), with no loosening for private deals
• The six categories of issuer due diligence: financial review, business plan review, management interviews, third-party interviews, site visits, and bring-down due diligence
• Why third-party interviews mean vendors, suppliers, and customers, never internal employees of the issuer
• Why bring-down due diligence is a pre-closing refresh, not a one-time event at signing, and how it closes the gap between underwriting agreement and closing date
• The situational-factor framework for reasonable investigation: type of issuer, type of security, type of underwriting arrangement, available information, and reasonable reliance on experts
• Why there is no fixed SEC checklist for a reasonable investigation, and how the sliding scale adjusts depth for a speculative initial public offering (IPO) versus a seasoned issuer's follow-on offering
• The limits of reasonable reliance on experts and management, and why red flags and contradictory information destroy the defense