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Questions and Answers
What is a key characteristic of bearer shares?
What is a key characteristic of bearer shares?
What legislation prohibits the issuance of bearer shares in the United States?
What legislation prohibits the issuance of bearer shares in the United States?
Why are bearer shares considered obsolete today?
Why are bearer shares considered obsolete today?
In jurisdictions that still allow bearer shares, what requirement is commonly imposed?
In jurisdictions that still allow bearer shares, what requirement is commonly imposed?
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What concern is associated with bearer shares due to their anonymity?
What concern is associated with bearer shares due to their anonymity?
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What type of diligence does the Financial Action Task Force recommend for owners of bearer shares?
What type of diligence does the Financial Action Task Force recommend for owners of bearer shares?
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What kind of document is a bearer share classified as?
What kind of document is a bearer share classified as?
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Which of the following is NOT a characteristic of bearer shares?
Which of the following is NOT a characteristic of bearer shares?
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What is a potential consequence of the lack of registration for bearer shares?
What is a potential consequence of the lack of registration for bearer shares?
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What must financial institutions do concerning bearer shares according to compliance recommendations?
What must financial institutions do concerning bearer shares according to compliance recommendations?
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Study Notes
Bearer Shares Overview
- Bearer shares are physical documents indicating ownership of stocks or bonds.
- Ownership is determined by possession; whoever holds the share owns it.
- These certificates do not include the owner's name and lack central tracking records.
Trading and Ownership
- Bearer shares can be traded without formal records; physical possession serves as proof of ownership.
- In the U.S., bearer shares are no longer issued by companies or governments.
Legal and Regulatory Framework
- The Corporate Transparency Act (CTA) of 2021 prohibits bearer shares and similar certificates in U.S. entities.
- Historical reliance on bearer shares has diminished due to digital advancements and regulatory scrutiny.
Risks and Illicit Activities
- Bearer shares pose risks of theft, loss, and misuse.
- Susceptibility to money laundering and tax evasion due to no ownership registration.
Global Regulation Trends
- Many countries have enacted strict regulations or outright bans on bearer shares to combat crime.
- Some jurisdictions allowing bearer shares mandate immobilization by licensed fiduciaries, who maintain ownership registers.
Due Diligence and Record-Keeping
- The Financial Action Task Force (FATF) recommends enhanced due diligence on bearer share owners.
- Financial institutions must document ownership acquisition, issuance details, and maintain detailed records of current and past holders.
Bearer Checks
- Bearer checks are unconditional financial orders payable to the holder rather than a specified payee.
- Verification of the presenter's identity is typically not required unless transactions exceed certain thresholds.
- Non-bearer checks can become bearer instruments if endorsed by the original payee.
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Description
This quiz examines bearer shares, also known as bearer certificates, which represent ownership of stocks or bonds. Learn about their characteristics, how they can be traded without ownership records, and the implications of their use in the financial market.
