kaal:claim:2811718-020

Deficient due diligence does not create securities fraud liability unless it is intentional or highly reckless; conduct that is merely negligent or professionally incompetent falls short of the scienter requirement.

Source quote, verbatim

Courts hold that the lack of due diligence, beyond merely being negligent or just professionally incompetent, must be intentional or highly reckless.

From

Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016), III.B.1. Legal Standards, p. 33
https://ssrn.com/abstract=2811718 · source PDF

Cite as

Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718

Holds when

securities fraud claims under section 10(b) and Rule 10b-5
PSLRA pleading standard

Classification

failuresupport: evidencedfailure: scienter gap for incompetent due diligencefamily: enforcement-gapsecurities-lawlaw-and-legal-systems

Verify

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