Legal Definitions - due-diligence information

Definition: Due-diligence information refers to the information that a broker-dealer must have on file and provide to potential customers before submitting quotations for over-the-counter securities. This information is required by the Securities and Exchange Commission (SEC) Rule 15c2-11 (17 CFR § 240.15c2-11).

Example: Let's say you are interested in purchasing shares of a company that is not listed on a major stock exchange. Before a broker-dealer can provide you with a quote for these shares, they must have certain information on file and make it available to you. This information may include financial statements, business plans, and other relevant documents that can help you make an informed investment decision.

Explanation: The example illustrates how due-diligence information is necessary to protect investors from fraudulent or misleading securities. By requiring broker-dealers to have certain information on file and make it available to potential customers, the SEC aims to ensure that investors have access to accurate and reliable information before making investment decisions.