http://www.thehindubusinessline.com/2010/06/20/stories/2010062051560100.htm
*Unit-linked plans to come under IRDA purview * ** ** ** *Ordinance issued to resolve regulatory row. * Our Bureau Hyderabad, June 19 The two-month suspense over who will regulate ULIPs (Unit Linked Insurance Plans) has ended, with the Insurance Regulatory and Development Authority (IRDA) gaining complete jurisdiction. In an Ordinance promulgated on Friday by the President of India, the Government made amendments to the RBI Act 1934, the Insurance Act 1938, the Securities and Exchange Board of India Act 1992 and the Securities Contract Regulations Act 1956, to bring about this clarity. A controversy over the regulation of ULIPs broke out between the IRDA and the SEBI on April 9, 2010, with the latter issuing a ban on the sale of these products by 14 life insurance companies. This move was challenged by the IRDA. According to official sources, the Insurance Act was amended to specifically mention that the life insurance business included ULIPs under the complete jurisdiction of IRDA. The Securities Contract Regulations Act was amended to say that securities do not include ULIPs. A provision which says that “ULIPs are neither mutual funds nor collective investments” was also inserted in the SEBI Act. “This would set at rest all the issues regarding ULIPs between the two financial regulators,” an official release from the Government said. Joint mechanism The Government has also put in place a joint mechanism to sort out differences among the regulators over the nature and jurisdiction of any financial product by amending the RBI Act. A high-level panel under the chairmanship of the Union Finance Minister has been constituted to look into such issues. The Union Finance Secretary, the chiefs of the RBI, the IRDA, the SEBI and the Pension Fund Regulatory Development Authority (PFRDA) would be the members of the panel. The Ordinance gains significance since many life insurers are waiting to launch new ULIP schemes now. Reacting to the development, a spokesperson of Max New York Life told Business Line that, “it is a welcome move as it clarifies the status of ULIPs as an insurance product. The mechanism to settle future disputes is also another good part of it.” The total funds under the ULIPs is at present over Rs two lakh crore, accounting for over 60 per cent of total life insurance business. Serious dimension The spat between the IRDA and the SEBI assumed serious dimensions after the market regulator wanted insurance companies to obtain prior approval before collecting funds from the public under the ULIP schemes. The SEBI had sought justification by claiming that as ULIPs had insurance and investment components, they needed to be regulated by it. They also come under the definition of collective investment schemes such as mutual funds, it added. On April 12, the warring regulators were summoned by the Finance Minister, Mr Pranab Mukherjee, who announced later that they had agreed to jointly seek a binding legal mandate from an appropriate court, while maintaining the status-quo. With no agreement reached on modalities, the SEBI on April 30 moved the Supreme Court to transfer public interest litigation pending in various High Courts to itself. After issuing notices to the Centre and 14 life insurance companies, the apex court posted the case for July 8. -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
