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A UK company issues shares denominated in pounds sterling. Under which definition in section 2 of the Foreign Exchange Management Act, 1999 do these shares fall?

Question and options

A UK company issues shares denominated in pounds sterling. Under which definition in section 2 of the Foreign Exchange Management Act, 1999 do these shares fall?

  1. Capital account asset

  2. Foreign exchange

  3. Foreign currency

  4. Foreign security

Answer and explanation

Correct answer: D - Foreign security

Section 2(o) of the Foreign Exchange Management Act, 1999 defines foreign security as any security in the form of shares, stocks, bonds, debentures or other instrument denominated or expressed in foreign currency, even if its returns are payable in Indian currency. Foreign currency (section 2(m)) is any currency other than Indian currency, and foreign exchange (section 2(n)) covers foreign currency and instruments such as deposits, drafts and travellers' cheques payable in it, not shares.

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