283 F. Supp. 643 (1968)
Plaintiffs instituted a class action suit under the Securities Act of 1933, 15 U.S.C.S. § 77k, contending that a corporate registration statement contained material false statements and material omissions against defendants statement signers, underwriters, and auditors.
- Noting that a prerequisite to liability was that the information falsely stated or withheld be material, the court determined that gross overstatements of sales, profits, and customer orders; understatements of liabilities; and the failure to disclose officer loans, customer delinquencies, and application of proceeds constituted material matters.
- Further, the court concluded that defendants who had known that the statements contained false information, as well as defendants who had failed to investigate or verify information, but merely relied upon the statements of others, could not have asserted a due diligence defense.
- Such defense required a showing that defendant had made a reasonable investigative effort or had had a reasonable basis for believing that the information was true.
The court denied various motions by the parties made a trial, issued findings of fact and conclusions of law in respect to certain issues, and retained jurisdiction for the resolution of cross claims and other remaining issues and claims peculiar to particular plaintiffs.
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Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials