Series 79: 5.3.1. Reasonable Investigation

5.3.1. Reasonable Investigation

As mentioned above, due diligence requires a reasonable investigation. But what constitutes a reasonable investigation? Fortunately, the SEC created a rule to attach some specifics to this requirement of the 1933 Act. This rule defines the “relevant circumstances” for determining if a reasonable investigation took place. 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

• Whether an individual is a director or proposed director

• Whether the person reasonably relied on officers, e