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Question
Kirrah Company makes a registered offering of its common shares under the Securities Act of 1933. A year after the offering, the federal government cancels a contract with Kirrah in compliance with the contract. The contract had provided and was expected to continue to provide 30 percent of Kirrah's business. The material risks section of the registration statement failed to state that the federal government provided 30 percent of Kirrah's business and that the federal government had the right to terminate the contract at any time. Among others, Amy Arston, the president and chief executive officer of Kirrah, is sued by purchasers of the shares under Section 11 of the Securities Act. What is Amy's due diligence defense under Section 11? Is Amy likely to be able to prove she met that defense?
Answer
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