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CS Executive · Capital Market and Securities Laws · Mutual Funds

Surya Life Insurance sells a unit linked insurance policy that combines an investment component with insurance cover. A promoter argues that Surya must therefore register with SEBI as a mutual fund under Section 12. Which view accords with the SEBI Act, 1992?

The view is incorrect. The Explanation to Section 12 states that a mutual fund or collective investment scheme does not include a unit linked insurance policy, or any similar instrument with an investment component besides insurance issued by an insurer, so no mutual fund registration is required for it.

  1. ACorrect, because any pooled investment component requires mutual fund registration
  2. BCorrect, but only if the investment component exceeds the insurance cover
  3. CIncorrect, because the Explanation to Section 12 says a mutual fund or collective investment scheme does not include a unit linked insurance policy or similar instrument providing an investment component besides insurance issued by an insurerCorrect
  4. DIncorrect, because insurers are exempt only from penalties and still need SEBI registration

Explanation

The Explanation to Section 12 declares, for removal of doubts, that a collective investment scheme or mutual fund does not include a unit linked insurance policy or any instrument that provides an investment component besides insurance, issued by an insurer. No comparison of component sizes is required. Option A ignores this carve-out.

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