Eco Sebi vs Irda

8/9/2019 Eco Sebi vs Irda

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Controversies between SEBI & IRDA

Flow of the presentation:

Reason of the dispute Role & concepts of

SEBI

IRDA

ULIP

Mutual Fund

Difference between Mutual funds & ULIP Complete story Effects of dispute news updates opinion

Presented by: Roll no.

Supriya Sawant 17

Kena Shah 28

Komal Shah 29

Niriksha Shah 32

Mitesh Sheth 41

Aniket Vanjre 55

Naveen Varma 58


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Securities & Exchange Board of India

SEBI & Its Objectives:

SEBI is the regulatory authority in India established under section 3 ofSEBI act 1992. SEBI act 1992 provides for establishment of Securities &

Exchange Board of India (SEBI) with statutory powers for

a) protecting the interest of investors in securities.b) promoting the development of securities market and,c) regulating the securities market.

Why do we need a regulatory body for Investor protection in India?

India is an ` informationally ' weak market Boosting capital market demands restoring the confidence of lay

investors who have been beaten down by repeated scams

Progressively softening interest rates and an underperformingeconomy have eroded investment options, and require enhanced

investing skills.

Functions of SEBI :

A) Review of the market operations, organizational structure and

administrative control of the exchange

- All stock exchanges are required to be Body Corporates

- The exchange provides a fair, equitable and growing market to

investors.

- The exchanges organisation, systems and practices are in accordance

with the Securities Contracts (Regulation) Act (SC(R) Act), 1956

B) Registration And Regulation Of Mutual Funds, Venture Capital

Funds & Collective Investment Schemes


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y AMFI-Self Regulatory Organization-'promoting and protectingthe interest of mutual funds and their unit-holders, increasing

public awareness of mutual funds, and serving the investors'

interest by defining and maintaining high ethical and

professional standards in the mutual funds industry'.

y Every mutual fund must be registered with SEBI andregistration is granted only where SEBI is satisfied with thebackground of the fund.

y SEBI has the authority to inspect the books of accounts,records and documents of a mutual fund, its trustees, AMC and

custodian where it deems itnecessary

C) Promoting & Regulating Self Regulatory Organizations

In order for the SRO to effectively execute its responsibilities, itwould be required to be structured, organized, managed and

controlled such that it retains its independence, while

continuing to perform a genuine market development role

D) Prohibiting Fraudulent and Unfair Trade Practices In The Securities

Market

y SEBI is vested with powers to take action against these practicesrelating to securities market manipulation and misleading

statements to induce sale/purchase of securities.

E] Prohibition of Insider Trading

Stock Watch System, which has been put in place, surveillanceover insider trading would be further strengthened.

F] Investor Education And The Training Of Intermediaries

SEBI distributed the booklet titled A Quick Reference Guide forInvestors to the investors


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SEBI also issued a series of advertisement /public notices innational as well as regional newspapers to educate and caution

the investors about the risks associated with the investments in

collective investment schemes

SEBI has also issued messages in the interest of investors onNational Channel and Regional Stations on Doordarshan.

Insurance Regulatory and Development

Authority (IRDA)

The Insurance Regulatory and Development Authority (IRDA) is a national agency of the

Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known

as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements.Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate,promote and ensure orderly growth of the insurance industry and for matters connected therewith

or incidental thereto."

The law of India has following expectations from IRDA

1. To protect the interest of and secure fair treatment to policyholders.

2. To bring about speedy and orderly growth of the insurance industry (including annuity and

superannuation payments), for the benefit of the common man, and to provide long term funds

for accelerating growth of the economy.

3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair

dealing and competence of those it regulates.

4. To ensure that insurance customers receive precise, clear and correct information about

products and services and make them aware of their responsibilities and duties in this regard.

5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and othermalpractices and put in place effective grievance redressal machinery.

6. To promote fairness, transparency and orderly conduct in financial markets dealing withinsurance and build a reliable management information system to enforce high standards offinancial soundness amongst market players.

7. To take action where such standards are inadequate or ineffectively enforced.

8. To bring about optimum amount of self-regulation in day to day working of the industryconsistent with the requirements of prudential regulation

Duties,Powers and Functions of IRDA


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Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions of IRDA

(1) Subject to the provisions of this Act and any other law for the time being in force, the

Authority shall have the duty to regulate, promote and ensure orderly growth of the insurancebusiness and re-insurance business.

(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers

and functions of the Authority shall include,

(a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel

such registration;

(b) protection of the interests of the policy holders in matters concerning assigning of policy,nomination by policy holders, insurable interest, settlement of insurance claim, surrender value

of policy and other terms and conditions of contracts of insurance;

(c) specifying requisite qualifications, code of conduct and practical training for intermediary orinsurance intermediaries and agents;

(d) specifying the code of conduct for surveyors and loss assessors;

(e) promoting efficiency in the conduct of insurance business;

(f) promoting and regulating professional organisations connected with the insurance and re-insurance business;

(g) levying fees and other charges for carrying out the purposes of this Act;

(h) calling for information from, undertaking inspection of, conducting enquiries and

investigations including audit of the insurers, intermediaries, insurance intermediaries and otherorganisations connected with the insurance business;

(i) control and regulation of the rates, advantages, terms and conditions that may be offered byinsurers in respect of general insurance business not so controlled and regulated by the Tariff

Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);

(j) specifying the form and manner in which books of account shall be maintained and statement

of accounts shall be rendered by insurers and other insurance intermediaries;

(k) regulating investment of funds by insurance companies;

(l) regulating maintenance of margin of solvency;

(m) adjudication of disputes between insurers and intermediaries or insurance intermediaries;

(n) supervising the functioning of the Tariff Advisory Committee;

(o) specifying the percentage of premium income of the insurer to finance schemes for

promoting and regulating professional organisations referred to in clause (f);


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(p) specifying the percentage of life insurance business and general insurance business to beundertaken by the insurer in the rural or social sector; and

(q) exercising such other powers as may be prescribed

Advisory Committee

IRDA consists of a Chairman and some permanent as well as part time members. The regulations,

however, are enacted under the guidance of a statutory advisory committee.

Unit Linked Insurance Plan

What is ULIP?

Unit Linked Insurance Plan - is a financial product that offers you lifeinsurance as well as an investment like a mutual fund. Part of the premiumyou pay goes towards the sum assured (amount you get in a life insurancepolicy) and the balance will be invested in whichever investments you desire -equity, fixed-return or a mixture of both.

Working of ULIPs:

It is critical that you understand how your money gets invested once youpurchase a ULIP:

When you decide the amount of premium to be paid and the amount of lifecover you want from the ULIP, the insurer deducts some portion of the ULIPpremium upfront. This portion is known as the Premium Allocation charge,and varies from product to product. The rest of the premium is invested in thefund or mixture of funds chosen by you. Mortality charges and ULIPadministration charges are thereafter deducted on a periodic (mostlymonthly) basis by cancellation of units, whereas the ULIP fund managementcharges are adjusted from NAV on a daily basis.

Since the fund of your choice has an underlying investment either in equityor debt or a combination of the two your fund value will reflect theperformance of the underlying asset classes. At the time of maturity of yourplan, you are entitled to receive the fund value as at the time of maturity.


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When ULIP works best?

Whether you are in the process of deciding which ULIP to invest in; orwhether you already have a unit linked insurance policy to secure yourimportant financial goals there are some key principles which should governany decision related to ULIPs. Adhering to these key principles will allow youto make optimum utilization of your ULIP.

y Appropriate Life Covery Right Fund Optiony Long Term Investmenty Know the Chargesy Know the Features

Appropriate Life Cover

Unit Linked Insurance (ULIP) plans are designed to help you meet yourfinancial goals by ensuring you the value of your investments, or yournominee sum assured, which is the life cover of your policy. To make sure thatyour ULIP is truly working to assure your goal, you should choose a life coverthat provides your family with adequate finances and hence security even inyour absence, so that important life goals of your family are always secured.

Let us take the example of a 35-year-old man with 2 young children. He couldbegin with a sum assured of Rs 5 lakh. As the children grow and thereby the

financial liabilities increase, he might want to increase the level of protection,which can be done by increasing his sum assured.

CHOOSING THE RIGHT FUND OPTION

Unit-Linked Insurance Plans (ULIPs) come with an in-built range of fundoptions to choose from ranging from aggressive funds (primarily invested inequities with the general aim of capital appreciation) to conservative funds

(invested in cash, bank deposits, and money market instruments with the aimof capital preservation) so that you can decide to invest your money in linewith your market outlook, time horizon, and your investment preferences andneeds. If you have a high risk appetite, you should opt for a more aggressiveinvestment option, and vice versa.

Additionally you also have the advantage of switching fund options to makeyour investments work in tandem with the market. These days, various ULIPs


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also offer the options of life stage fundswhich keep dynamically alteringthemselves without you having to do any monitoring on your own.

STAYING with a ULIP for LONG TERM

U

nit-Linked Insurance Plans (U

LIPs)are meant to guarantee your financialgoals over the long-term. As a short term investment tool, they will not giveyou considerable return on your investments, because of a product coststructure which is higher in the initial years. However, overall chargestructure for the term comes down substantially over a long period of timethus allowing greater allocation of your premium in the chosen funds.

Also in long term investment in ULIPs are less affected by temporarymarket fluctuations since data shows that over a long-term, market linkedinvestments not only yield very attractive returns, but also have the least

downside to them. To get the best out of your ULIP, you should remaininvested in the ULIP for the long-term of at least 8-10 years. This way, yourinvestment will truly experience the power of compounding and therebycreate greater wealth for you to fulfill your important goals.

UNDERSTANDING the CHARGE STRUCTURE

Unit-Linked Insurance Plans (ULIPs) are designed to meet two of your most

important financial needs: protection and investment. Both these benefitshave some charges attached to them; important charges to know about beforepurchasing a ULIP are:

y Premium Allocation chargey Policy Administration chargey Mortality chargey Fund Management charge

The important thing to note aboutULIPs is that the overall charge structure inthe long term comes down substantially, thus allowing greater allocation ofpremium to your chosen fund, thereby leading to wealth creation. It may benoted that insurers have the right to revise the fees and charges over a periodof time.


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KNOWING the FEATURES

Unit-Linked Insurance Plans (ULIPs) offer you a variety of features andbenefits that no other single financial instrument does. MostULIPs are rich infeatures such as top up, switch between funds, increase or decrease theprotection level during the term of the policy, cover continuance option,surrender options & range of riders which can be attached to the main policy

to provide you added protection. As with all other products, the exact featuresof a Unit Linked Insurance Policy differ from one product to another.

You should always insist on seeing the brochure so that you can make rightchoices ofULIP to secure your goals be it retirement planning, planning foryour childrens education, or wealth creation.

Why buy ULIPs?

ULIPs are dynamic plans and are flexible by nature and hence allow forchanges and high degree of customization in the plan as opposed to most ofthe financial plans which once purchased cannot be modified. It is because ofembedded characteristics of transparency, flexibility, liquidity & goal basedsavings thatULIPs have emerged as preferred investment option today.

The following subsections will not only help you to understand variousattributes of ULIPs but also guide you to use these features to manage yourpolicy.

y Flexibilityy Transparencyy Goal Based Savingsy Tax Benefits

Concept of Mutual fund

1)Mutual fund is a trust that pools money from a group of investors(sharing common financial goals) and invest the money thus collected

into asset classes that match the stated investment objectives of the

scheme.

2)The money collected from investors are invested in different securitieslike bonds , shares, debentures etc


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3) Any capital gain or losses from investments are passed on to investorsaccording to no. of shares they held

Role of MUTUAL FUND

1)A mutual fund sells you shares of itself to raise cash.2)The fund invests these proceeds in a portfolio of securities.3)A team of professional fund managers and analysts is tasked with

managing a mutual fund. The team selects individual securities that

have the risk-return characteristics that are consistent with the fund's

investment

4)The fund team monitors the investment performance of the portfoliodaily. If one of the portfolio's holdings falls out of favor, the team may

sell the security and buy another. Alternatively, instead of immediately

reinvesting the cash elsewhere, it may decide to park the money

temporarily and earn a risk-free interest rate until a better investment

opportunity comes along

Functions of MUTUAL FUND

1)Professional Management - Experience and training count for a lot in theworld of investments. It is a world where not knowing the right pricing

convention can cost you a couple thousand dollars in a few seconds. The

key to mutual fund performance and one of its main functions for passive

investors is the fact it is a hands-off investment. The fund is professionally

managed by money managers and a dedicated research team

2)Diversification - One perk to professional management is diversification,which serves a risk mitigation function for mutual funds. The morediversified your portfolio, the more you can mitigate the risk of losing youroriginal investment value. Another way to say this is, "Don't put all youreggs in one basket."


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3)Affordability - Affordability is a key consideration for most mutual fundinvestors. The majority of those who invest in mutual funds do not have

huge estates to invest and only small amounts to contribute on a monthly

basis. Being able to pay into an investment on a monthly basis provides the

mutual fund greater access to a larger investment community

4)Liquidity - In addition to affordability, mutual fund shares can be easilyredeemed (provided redemption fees or back-end funds are not excessive).

Increased liquidity contributes to lowering the overall level of risk of

investing in anything that is not liquid

DIFFERENCE

UL

MUTUAL FUND ULIP

5 year horizon 10 year horizon

Regulated by SEBI Regulated by IRDA

Focus on low cost and betterperformance

Focus more on distribution reach

Better portfolio disclosure anddaily NAV

Increase life cover

Less cost of insurance High cost of insurance

short term investment Long term investment

IP

Some more key differences between MUTUAL FUNDS

and ULIP:-

Flexibility:-


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Mutual funds are less flexible in comparison with ULIP. In ULIP if an customer

wants to make any alterations or modifications in the same plan then they can

opt for it, whereas in mutual funds the investor has to completely buy new

funds. Lets us take an illustration to understand it.

Eg :- If A wants to change the current plan of 200000/- and extend it to

500000/- in ULIP then he can do so with the same amount of premium.

Benefits and Allowances:-

In ULIP, investors gets accident benefits, Death benefits and also tax benefits.

In case of mutual funds, customer only gets Tax benefits.

Transparency:-

Mutual funds are more transparent in comparison with ULIP. The investor inmutual funds are aware where their money has been invested by the fund

managers whereas in ULIP the transparency is very less.

Disputes between SEBI and IRDA

Lets us try and understand in laymans language.

SEBI and IRDA are two regulating bodies.

SEBI controls and regulates the following:-

1)Capital market ie Stock market2)Mutual funds3)Any thing that would include investment.

Now speaking about IRDA it controls,

1)Anything that includes insuranceAnd also ULIP was introduced by IRDA.

Now as we all know that functional procedure of mutual funds and ULIP

is the same ie it has customers or investors who invests in this and then

these funds are being invested in the capital markets by fund managers.

Then if out of these funds if the company makes profit then its been

distributed according to its investment ratios. One thing that we need to


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remember here is that Mutual fund is just an investment plan whereas

ULIP is not only insurance but also an investment plan.

Now as we all know ULIP has been growing and the investments in it are

increasing. This funds which are collected or accumulated are invested in

the Stock markets. So what happens is sometimes there is huge

investment and sometimes there is low investment throughU

LIP in stockmarkets. Now due to this the stock market becomes volatile ,unstable and

volatility in it increases.

So due to this, SEBI says that since its affecting the stock exchange

markets and ULIP also includes investment plan it should be regulated

and controlled by him ie SEBI.

But on the other hand IRDA says that since it includes the term insurance

and since it has been introduced by insurance sector it should be

controlled by him ie IRDA.This is the reason for its dispute and it has been going on since 2005. But

then now finally SEBI took action and banned 14 insurance companies

who were selling ULIPs.

Here is the list of insurance firms who are banned to issue ULIPs:

Here is the list of insurance firms who are banned to issue ULIPs:

a Aegon Religare Life Insurance Company Limitedb. Aviva Life Insurance Company India Limitedc. Bajaj Allianz Life Insurance Company Limitedd. Bharti AXA Life Insurance Company Limitede. Birla Sun Life Insurance Company Limitedf. HDFC Standard Life Insurance Company Limitedg. ICICI Prudential Life Insurance Company Limitedh. ING Vyasa Life Insurance Company Limitedi. Kotak Mahindra Old Mutual Life Insurance Limited

j. Max New York Life Insurance Co. Limitedk. Metlife India Insurance Company Limitedl. Reliance Life Insurance Company Limitedm. SBI Life Insurance Company Limitedn. TATA AIG Life Insurance Company Limited

Effect of disputes


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Cannot issue new ULIP policy after April 9: All 14 companies are beenbanned to sell Ulip from 9th April, this will impact the company working

and increases the problem of payment to issuer.

Withdrawn of Rs. 75000/- crores: If the companies does not issue newULIP there will be withdrawal of Rs.75000/- crores from the stock

market. The companies have to withdraw money from the market

because they have to make payment to the existing policy holder at the

time of maturity or withdrawal of policy.

Benefits to LIC: LIC is benefited because it is not banned from sellingULIP because it is the government company and at the time of crises

LIC pumped in Rs. 3000/- crores in the stock market in order to

maintain sentiments of the investor. LIC is the father of all insurance

companies banning LIC will harm the sentiments of the investor.

ULIP ruling will impact corpus of banks present in insurance: Manybanks who are directly or indirectly related to the insurance company

will be affected because they earn through these insurance company by

the way of stake or procedure of issuing policy.

Those ones which have insurance company had two major benefits. Onewas clearly the corpus was growing exponentially. Especially in the lasttwo-three years if you see the corpus was growing exponentially and

especially with the new ULIP policies the sort of fees they were earningin the first two years was phenomenal. Now with this latest ruling - andin case it stays that way - I think they would clearly take a hit on thecorpus.Secondly, the fees would clearly go down quite a lot. We have seen thathappening for the mutual funds and for the insurance companies fromnearly 30%-40% sort of fees going down to say 1.5%-2%. Its a majorcut. So I think this is clearly playing out.

More of FDs and Mutual funds: Banning ULIP will shift the investmentfrom ULIP to FDs and Mutual Funds, giving new trend to this. These will

happen to have a surety of their investment.

No effect to life insurance business: There is no effect to the traditionallife insurance business because the key period of all insurance


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companies is from Januaury to March during these period they earn 40

to 50 percentage of there profit, from April to June it is a lean period.

Market was trading in negative point: On the first day after the ban themarket was trading in red almost 100 point down but after the

statement from our finance Minister Mr. Pranav Mukerjee the market

started recovering.

Investor feel they are mis-sold: After laying the ban on all insurancecompanies investor feel they are cheated so , they feel they are mis-sold

and this lead to selling ofULIP policies.

Kotak Mahindra Bank fell over 2%. ICICI Bank, HDFC, SBI, PNB and AxisBank slipped 0.5-1%

Banking and financial stocksConclusion

According to the section 90 these case cannot be held in Civil Court

because it is matter of jurisdictional disputes, Civil court does not have

power to deal with.

Quasi judicial order, can be challenged in the SAT only and appeal

against any order of SAT lies only before Supreme Court ( S 15 Z of the

SEBI Act).

SEBI had instead suggested that the PILs filed in Lucknow and Mumbai

should be clubbed and shifted to the Supreme Court.

Supreme court hearing is on 8th July

CURRENT UPDATED NEWS ON ISSUE:

1. ULIP crisis resolved; SEBI, IRDA agree to MoF formula 12THAPRILNEW DELHI: The government on Monday said the two regulators SEBI and

IRDA have agreed to maintain the status quo that existed before market

regulator's ban on 14 life insurers from raising funds for unit-linked schemes.


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The status quo will be maintained till a court decides who can regulate ULIP

schemes, Finance Minister Pranab Mukherjee told reporters here.

ULIP is an insurance product in which a bulk of the premiums is invested in

equities and bonds.

"To resolve any ambiguity and to ensure smooth functioning in the market,

the regulators have agreed to jointly seek a binding legal mandate from anappropriate court," Mukherjee said.

"Meanwhile, status quo ante is being restored," he told reporters outside the

finance ministry.

Mukherjee's comments came after a series of meeting between Finance

Ministry officials and IRDA Chairman J Hari Narayan SEBI chief C B Bhave.

SEBI last Friday banned 14 life insurance companies from raising funds

through unit-linked insurance policies.

A day later, insurance sector regulator IRDA asked the companies to ignore

the SEBI order and do business as usual.

The ball had since gone into the Finance Ministry's court. Bhave and Hari

Narayan held separate meetings with Finance Secretary Ashok Chawla on the

ongoing tussle between the two regulators.

The life insurance companies against whom SEBI passed the order are SBI

Life, ICICI Prudential, Tata AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz,

Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra

Old Mutual Life, Max New York Life, Metlife India and Reliance Life.rore (little

over $20 billion).

2. INSURANCE COUNCIL SAYS SEBI BAN NEW ULIPS SURPRISING 13 Apr 2010NEW DELHI: The Life Insurance Council on Tuesday termed today's Sebi

order of continuing its Friday ban to new Ulip schemes as "surprising"

and said it will hurt the new players the most.


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"One was under the impression that everything is straight now; the

courts will decide and things would continue as normal,especially after

what finance minister Pranab Mukherjee's statement. This step of not

allowing new products is a little surprising," said council secretary-

general SB Mathur.

He, however, added there is clarity about the fate of existingU

lipslaunched by companies before April 9, 2010.

Earlier in the day market regulator Sebi announced that any Ulip

scheme launched after April 9, by insurance companies will continue to

be covered by its ban order. The 14 companies specified in its earlier

order, however, will not be able to launch new Ulip schemes.

"It will definitely affect those companies that have started business lastyear or two years ago, in a year or two. They weren't able to sell many

products. They have been unfairly affected by this order. There will be

not be a level playing field for those companies who have just started

business and the older ones," Mathur added.

To a query if the council plans to move court against the order, Mathur

said, "we will have to discuss with regulators (Sebi and Irda) on what

they want us to do, what is their actual understanding. If it is as per

their understanding then, well, then there is no point in dragging the

matter to the judiciary."

The Insurance Regulatory Development Authority (Irda) had earlier

asked the insurance companies to ignore Sebi's ban order and continue

the business as usual, forcing the government to intervene and broker a

truce between the regulators.

3. GOVT ASKS SEBI, IRDA TO MOVE COURT AT ONCE ON ULIP ISSUE 14THAPRILNEW DELHI: Concerned over the ongoing public spat between the two

regulators, Government today asked SEBI and IRDA to move court

immediately on the contentious issue of who will regulate unit-linked

insurance products.


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At the same time, Finance Secretary Ashok Chawla did not find anything amiss

in SEBI's yesterday's order asking insurers not to issue any fresh ULIPs, which

some analysts felt was against the status quo ante directed by Finance

Minister Pranab Mukherjee on Monday.

"We want them to go to the court at the soonest. Finance Minister hasmentioned status quo ante, which means that whatever prevailed before the

date of the SEBI order will continue unhindered... that is what SEBI has said,"

Chawla told reporters.

When the fight between the regulators became public on Friday last following

SEBI ordering a ban on 14 insurers from raising fresh equity through ULIP, a

move challenged by IRDA Chairman J Hari Narayan, Chawla had said that it

was for the two to settle between them."The larger issue on who has the regulatory oversight authority (over ULIPs)

...will be decided by the court. We want them to go to the court at the soonest,"

Chawla said.

SEBI yesterday came out with a second order on the ULIP issues while

keeping in abeyance its earlier ban on existing ULIP schemes of 14 life

insurance companies, which included those promoted by SBI, ICICI Bank and

Reliance Anil Ambani Group.

The market regulator, however, added a new twist to the controversy by

asking insurers not to issue any fresh unit linked insurance plans after April 9,

2010 without SEBI registration.

4. IRDA-SEBI ROW OVER ULIP HAD BEEN ON HLCC AGENDA: RBI 22NDAPRILMUMBAI: Regulators SEBI and IRDA had agreed to settle the issue of

jurisdiction over ULIPs mutually at the High Level Coordination Committee

(HLCC),

an inter-regulatory body on financial markets, before the conflict snowballed

into a full-blown turf war, the Reserve Bank disclosed today.


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"The HLCC did consider this issue. It has been on the agenda for the last

several months," RBI Governor D Subbarao, who is also the chairman of HLCC,

told media when asked why HLCC has not able to resolve the overlapping

power of regulators.

Subbarao further said that both the regulators-IRDA and SEBI-have agreedthat they would settle the issue bilaterally. HLCC, chaired by RBI Governor,

consists of banking, capital markets, insurance and pension regulators,

besides representatives from the ministry of finance.

It is a high level forum for interface among the financial sector regulators.

"What turned up is a legal issue. Perhaps there should be an agreement... to

settle at the legal forum," he added.

Earlier this month, SEBI banned 14 life insurance companies from raising

funds through unit-linked insurance policies, which invest the money

collected into equity and debt markets. However, IRDA asked the insurance

companies to do business as usual.

After SEBI and IRDA came out with conflicting orders with each other, Finance

Ministry intervened and persuaded the two to agree to seek a legally binding

mandate over their jurisdiction over the ULIPs.

Following that, SEBI in a fresh order said that no insurance firm should issue

any fresh unit-linked insurance products (ULIP). The insurance companies,

which come under the ban include those promoted by SBI, ICICI Bank and

Reliance Anil Ambani Group.

5. ULIP ISSUE: SEBI-IRDADIFFER ON LEGAL MODALITIES 29TH APRILNEW DELHI: Contrary to their earlier stand to move court jointly for settling

the issue of control over Ulips, difference have surfaced between insurance

regulator IRDA and market watchdog SEBI on the legal recourse.

Insurance regulatory development authority (IRDA) said that it wanted to

seek a legal mandate jointly with SEBI, but the market regulator had


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reservations.

"SEBI has written a letter to us, that according to their legal counsel, the joint

application is not valid in this (Ulip) case under section 90 of Civil Procedure

Court," IRDA Chairman J Harinarayan told PTI from Hyderabad.

According to sources, a renowned lawyer had suggested the regulators filed a

case under section 90, as they were not adversaries fighting each other but

only required a legal clarification over jurisdiction.

Under section 90 "if any person agrees in writing to state a case for the

opinion of the court, then the court shall try and determine the same in the

manner prescribed."

When asked whether IRDA would again approach the government, he said it

could be one of the options.

However, SEBI Chairman C B Bhave refused to comment on the issue, when

contacted.

The high voltage dispute between SEBI and IRDA arose when the market

regulator banned 14 life insurers, including those belonging to SBI and

Reliance Anil Ambani Group, from raising any further money from Ulips

unless they are registered with the market watchdog.

However, IRDA asked insurers to ignore the order and continue doing

business as usual.

After the two conflicting orders, the matter reached the Finance Ministry,

where the two watchdogs agreed to jointly seek a legally binding mandate

from an "appropriate" court. Till then, status quo ante was restored.

Following government directive, SEBI allowed insurers to raise money from

existing Ulips, but banned new launches under the scheme.

SEBI has been contending thatUlips, which have an investment content,


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should fall under its purview, while IRDA says as Ulips are an insurance

product they are the subject matter of the insurance regulator.

6. SC NOTICE TO CENTRE, IRDA ON SEBI PLEA 1 MAY 2010NEW DELHI: The Supreme Court on Friday issued notices to the Centre, the

insurance regulator and insurance companies seeking their response on

allegations that some insurers mis-represented features of the popular unit-

linked insurance plans, or Ulips, while selling them.

The apex courts action follows market regulator Securities & Exchange Board

of Indias plea seeking transfer of all public interest litigations on Ulips invarious courts across the country to the Supreme Court.

A three-judge bench of the court headed by Justice SH Kapadia also sought

responses from litigants who filed public interest litigations, or PILs, in the

Bombay and Allahabad high courts. The court would hear the matter on July 8.

Case is not about SEBI-IRDA tussle

This case does not deal with the dispute between SEBI and the Insurance

Regulatory & Development Authority, or IRDA, on who among them has the

jurisdiction to regulate Ulips.

That would be settled in a high court separately. SEBI and our problem is of

jurisdiction, said IRDA chairman J Hari Narayan. The PILs do not deal with

the issues relating to dispute about jurisdiction, but about mis-selling. Does

SEBI have the right to regulate Ulips? That is the question. That is not thequestion in the PIL.

Ulips, the most popular instrument among investors to save for the future and

get some insurance cover too, has led to a regulatory turf war between SEBI

and IRDA. SEBI says that since the product has the features of investment, it

should be regulated by it. But since insurance companies are regulated by

IRDA, the Hyderabad-based insurance regulator says SEBI has no business to


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interfere with the entities which fall under its purview.

SEBI had banned 14 insurance companies from selling Ulips. An

uncomfortable peace was brought in by the finance ministry, which broke.

SEBIs petition was mentioned before the court by Attorney General Goolam E

Vahanvati.SEBI is in Mumbai, insurance companies are in Mumbai, LIC is in Mumbai,

the court said indicating that the matter could be heard by the Bombay High

Court.

Why not club all petitions at a Mumbai civil court, the court asked. Mr

Vahanvati said the Supreme Court would be the appropriate forum to resolve

the issue since civil courts lack authority under Section 90 of the Civil

Procedure Code to resolve jurisdictional disputes.

Eco Sebi vs Irda

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