The start: The notices issued by Securities and Exchange Board of India (Sebi) in August 2009 to few life insurers asking them why action be not taken against them for selling ULIPs without the market regulator’s prior approval. When the controversy did not ebb, the Insurance Regulatory and Development Authority (IRDA) said in March 2010, “ULIPs are globally managed by insurance regulators and under no circumstances will we let ULIPs be taken over by Sebi.”
The growth: On April 9, Sebi aggravated the dispute by banning 14 private insurance companies from raising money by asking them to stop issuing/servicing ULIPs. IRDA promptly asked the insurers to ignore the Sebi’s order.
Four days later, Sebi modified its April 9 order and exempted all existing ULIPs from the ban but maintained that its prior permission was mandatory for issuing new ULIPs. Amid the conflicting orders, the finance ministry brokered peace between the two regulators and asked them to jointly seek clarification from an appropriate court.
Now: The Supreme Court on Friday agreed to resolve question – Who should regulate Unit Linked Insurance Products (ULIPs), Sebi or IRDA? – but asked: “Do we need a super regulator?”
The Bench comprising Justice S H Kapadia, Swatanter Kumar and A R Dave asked Attorney general G E Vahanvati (representing Sebi) if all petitions could be clubbed at a Mumbai civil court as most parties (including IRDA) had headquarters there. To this AG said that the apex court would be the most suitable forum for resolving the issue, in which both regulators had a valid point and also the civil court Section 90 of Civil Procedure Code would not have sufficient power to resolve the jurisdictional dispute.
Sebi believes that such a quarrelsome issue would be best adjudged to everyone’s satisfaction by the Supreme Court. Following which, the apex court issued notices to the Centre and 14 life insurers on Sebi’s petition seeking transfer of cases from all High Courts to Supreme Court.
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Tags: IRDA, SEBI, ULIP, Unit-linked Insurance Policy or ULIPs