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

Which characteristic is associated with bearer share certificates?

1. Owned by individuals only

2. Non-negotiable and restricted

3. Transferable by physical possession

4. Registered in the name of the holder

The correct answer is: Transferable by physical possession

Bearer share certificates are distinct in that they can be easily transferred through physical possession. This characteristic means that whoever physically holds the certificate is considered the owner, making it a straightforward method for transferring ownership without the need for formal registration or endorsing procedures. The simplicity of this transferability can appeal to those who prioritize privacy or quick transactions, but it also raises concerns regarding anonymity and potential misuse in financial crimes, such as money laundering. The other characteristics associated with bearer shares do not accurately represent their nature. For instance, they are not limited to individual ownership, and they are often negotiable and not restricted. Furthermore, bearer shares do not require registration in the name of the holder, further emphasizing their unique transferability aspect. Thus, the correct association of bearer share certificates is their ability to be transferred merely by taking physical possession of them.