Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

Which characteristic best describes a 'Blank Check Company'?

1. Significant assets and a clear business plan

2. Limited assets with little activity and no experienced management

3. A company with a diverse range of investments and operations

4. A financial institution focused on account management

The correct answer is: Limited assets with little activity and no experienced management

A 'Blank Check Company' is defined as a type of company that has no established business operations or specific business plan at the time of its formation. Typically, these companies are created with the intention of raising capital through an initial public offering (IPO) for the purpose of acquiring or merging with an existing company. This characteristic aligns perfectly with the provided answer, as blank check companies generally have limited assets and little actual business activity. These companies often lack experienced management, primarily because they are structured to seek acquisitions rather than operate a business from the outset. Investors in blank check companies are essentially betting on the future potential of the firm to find a suitable business to acquire. This context emphasizes the speculative nature of such companies and how they are characterized by their initial absence of business operations. The other options do not accurately capture the essence of a blank check company. A company with significant assets and a clear business plan would refer to a more established business rather than a blank check entity. Similarly, a company with a diverse range of investments or one operating as a financial institution focused on account management does not pertain to the nature and purpose of blank check companies.