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CMA Final · Corporate and Economic Laws · Investment and Loans

Which statement about the interaction of Section 186(11) with the layer restriction in Section 186(1) is correct?

Section 186(11) exempts specified entities and activities, such as banking, insurance and housing finance companies acting in the ordinary course of business, from the section, but it expressly excepts sub-section (1). So the two-layer restriction on investment companies continues to apply to them.

  1. ASection 186(11) exempts banking, insurance and housing finance companies in the ordinary course of business from the other provisions of Section 186 but not from sub-section (1)Correct
  2. BSection 186(11) exempts banking companies from every sub-section including sub-section (1)
  3. CSection 186(11) applies the layer restriction only to investment companies
  4. DSection 186(11) replaces the layer restriction with a sixty per cent limit for insurance companies

Explanation

Section 186(11) begins 'Nothing contained in this section, except sub-section (1), shall apply' to the listed loans, guarantees, securities and investments. Hence the layer restriction in sub-section (1) still applies to them. The other options misstate the carve-out.

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