Due Diligence Defense for Section 11 Liability

Forensic Accounting & Advisory Services

Section 11 of the Securities Act imposes liability for underwriters, directors and others involved with a public securities offering. The statute also provides a due diligence defense for everyone, except the issuer. FTI Consulting professionals are uniquely qualified to provide services prior to the deal closing to strengthen the due diligence defense of those involved with an offering.

Our consultants and testifying experts can also assist, after-the-fact, in determining whether adequate due diligence was performed prior to the offering. FTI Consulting’s professionals include former officials with the Securities and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Public Company Accounting Oversight Board (PCAOB), and former partners and managers with audit firms including the Big Four and their predecessor firms.

To effectively use the due diligence defense, a Section 11 defendant carries the burden of proof to demonstrate that he or she, after reasonable investigation, had reason to believe, and did believe, that the statements in the registration statement were true and free of material omissions. Without a due diligence defense, Section 11 claims can be difficult to defend since plaintiffs are not required to show scienter or that the misstatement or omission caused the plaintiff’s loss.

Because FTI Consulting has seasoned professionals with vast experience in accounting standards, auditing, disclosure requirements, internal control over financial reporting (ICFR), and forensic accounting, we are the go-to resource when performing due diligence and establishing a due diligence defense for underwriters and others subject to Section 11 liability.