SEBI-IRDA Conflict Resolved

The Indian Government on 19 June 2010 put an end to the Securities and Exchange Board of India (Sebi)- Insurance Regulatory and Development Authority (IRDA) conflict over unit-linked plans (ULIPS) maintaining that ULIPS would be regulated by IRDA. SEBI is the securities regulator and IRDA regulates insurance companies. The prevalent practise is that any financial scheme which has an insurance component tends to be regulated by the insurance regulator. ULIP happened to act as mutual funds, which are subject to the securities regulator. ULIPs also account for 50 per cent and more of the life insurance business and the money collected through them is invested in equities. The question arose as to whether IRDA or SEBI should regulate ULIPs. SEBI in April 2010 had banned 14 life insurance firms from issuing fresh ULIP schemes. The IRDA had asked the life insurers to ignore the SEBI order. The matter escalated to the Ministry of Finance but no conclusion could be reached at the meeting between the Finance Ministry and Chairman of IRDA and SEBI. The regulatory bodies were asked to move the court as well. The RBI Act, the Insurance Act, the SEBI Act and the Securities Contracts Regulation Act were amended on 18 June 2010 and clarity on regulation of ULIPs was brought. The Union Cabinet meeting on 17 June 2010 had cleared the Securities and Insurance Laws (Amendment and validation) Ordinance, 2010. The ordinance states that products that are approved by IRDA and pension watchdog PFRDA would not fall under the purview of SEBI.