Sebi Irda battle it out?

Sebi Irda battle it out?
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First Published: Mon, Apr 12 2010. 01 15 AM IST
Updated: Wed, Apr 14 2010. 03 47 PM IST
The capital market regulator, Securities and Exchange Board of India (Sebi) clarified exclusively to Mint that it aims to cover Life Insurance Corporation (LIC)- India’s largest insurance company- and eight of the remaining insurance companies whose names did not feature in an order it issued on 9 April 2010 that bans them from selling, advertising or marketing unit-linked insurance plans (Ulips). Says K.N. Vaidyanathan, executive director, Sebi: “Out of 23 insurance companies, 14 companies have been served a notice, where we had competed the investigation and the member (Prashant Saran who passed this Sebi order) had come to the conclusion.” Sebi is presently evaluating ther companies, he said, though they have already been sent a copy of this Sebi order, “for their their reference and appropriate action.”
S B Mathur, secretary general, The Life Insurance Council - an industry association of life insurers - said in an interview on CNVB-TV18 that insurance companies will meet the Life Insurance Council on the morning of 12 April, to decide their further course of action. Speaking to Mint exclusively, J Hari Narayan, chairman, Irda said, “The Sebi order is anti-policy holders. So, I am directing the 14 insurance companies to continue selling ULIP products, notwithstanding the Sebi order. We are not proceeding against Sebi. The ball is in Sebi’s court now.” Irda has responded to Sebi in its press release that asks insurance companies to keep selling “in accordance with the Insurance Act, 1938, Rules, Regulations and Guidelines issued thereunder by the IRDA.”
In an order that Sebi passed late in the night of 9 April, it banned 14 insurance companies, including HDFC Standard Life Insurance Company Ltd, Aviva Life Insurance Company Ltd, Birla Sun Life Insurance Company Ltd, from selling ULIPs. It said that under section 11 of the Sebi Act, any firm that runs a collective investment scheme must get a prior approval from Sebi.
It concluded that since Ulips are a combination of investment and insurance, companies offering Ulips must seek Sebi’s prior approval before investing their corpuses into the equity markets, which is regulated by Sebi.
Interestingly, though Sebi has banned these insurance companies from accepting fresh or additional money through Ulips (including existing ones), the order also seems to indicate that this ban will be eased once insurance companies seek Sebi’s approval for such policies that combine insurance with investment. In other words, just like currency futures as a hedging instrument that is governed both by the Reserve Bank of India (RBI; India’s banking regulator that oversees currency matters) and the Sebi (that overlooks stock exchanges on which currency futures are traded), Sebi also intends to overview ULIPs as they collect money from investors and invest in the stock markets, in addition to Insurance Regulatory Development Authority (Irda)- the insurance regulator- for Ulip’s insurance portion.
If insurance companies keep selling they will be violating a quasi-judicial order and Sebi may take them to court.
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First Published: Mon, Apr 12 2010. 01 15 AM IST
More Topics: Ulip issue | Sebi | Irda | Ulips | Insurance companies |
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