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nism-series-xa-scra-section-2h-securities-definition-exclusion[ INVESTMENT ADVISER (LEVEL 1) ]
Under Section 2(h) of the Securities Contracts (Regulation) Act, 1956 (SCRA), which of the following instruments is EXCLUDED from the statutory definition of 'securities'?
[ A ]Government Securities and Zero Coupon Zero Principal instruments
[ B ]Security Receipts issued under the SARFAESI Act, 2002
[ C ]Unit-Linked Insurance Policies (ULIPs) issued by an insurance company[ CORRECT ]
[ D ]Units issued by a Collective Investment Scheme or Mutual Fund scheme
Takeaway
Under Section 2(h) of SCRA, Unit-Linked Insurance Policies (ULIPs) issued by an insurance company are specifically excluded from the statutory definition of 'securities'.
Derivation
SCRA's definition of 'securities' is deliberately broad, sweeping in shares, government securities, security receipts under SARFAESI, and units of collective investment schemes or mutual funds — but Parliament carved out an explicit exception for ULIPs and similar insurer-issued instruments combining life-risk cover with an investment component, because these products are already comprehensively regulated under the Insurance Act, 1938 by IRDAI rather than SEBI. This exclusion prevents regulatory overlap/conflict between two different sectoral regulators governing the same product, and the exam tests whether candidates recognize this specific, named carve-out rather than assuming the SCRA definition of securities is unconditionally all-encompassing.
Why the others fail
A — Government Securities and Zero Coupon Zero Principal instruments
Government Securities and Zero Coupon Zero Principal instruments are explicitly included within, not excluded from, the SCRA Section 2(h) definition of securities.
B — Security Receipts issued under the SARFAESI Act, 2002
Security Receipts issued under the SARFAESI Act are explicitly included within the SCRA definition of securities, not carved out as an exclusion under Section 2(h).
D — Units issued by a Collective Investment Scheme or Mutual Fund scheme
Units issued by a Collective Investment Scheme or Mutual Fund scheme are explicitly included within the SCRA definition of securities, not excluded.
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