THE RADIANT JUSTICE CHAMBERS, OBAFEMI AWOLOWO UNIVERSITY⚖️ LEGAL NUGGETS DUE DILIGENCE Due diligence became a common practice in the U.S with the passage of the Securities Act of 1933. With that law, securities dealers and brokers became responsible for fully disclosing material information about the instruments they were selling. Failing to disclose this information to potential investors made dealers and brokers liable for criminal prosecution. The writers of the act recognized that requiring full disclosure left dealers and brokers vulnerable to unfair prosecution for failing to disclose a material fact they did not possess or could not have known at the time of sale. Thus, the act included a legal defense: As long as the dealers and brokers exercised "due diligence" when investigating the companies whose equities they were selling, and fully disclosed the results, they could not be held liable for information that was not discovered during the investigatio...
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