The Supreme Court issued notices to the Centre and 14 life insurers on a petition by market regulator Sebi seeking transfer of cases from High Courts relating to Unit Linked Insurance Products (ULIPs).
Sebi is locked in a turf battle with insurance regulator IRDA over who has jurisdiction over ULIPs.
A bench headed by Justice S H Kapadia also sought response from some PIL litigants who have raised the issue concerning ULIPs in various High Courts.
During a brief hearing, when the petition filed by Sebi was mentioned by Attorney General G E Vahanvati, the bench questioned Sebi's move to file the petition before the apex court.
Sebi is in Mumbai, insurance companies are in Mumbai, LIC is in Mumbai," the bench remarked and indicated that the Bombay High Court could have heard the matter.
Vahanvati, in his submission, said that the issue of jurisdiction too has to be settled by the apex court.
The bench said, basically, both the regulators are fighting and wondered, "why not appoint a super regulator." It later posted the matter for hearing on July 8.
The dispute over jurisdiction of ULIPs between Sebi and IRDA snowballed into a major controversy after the market regulator banned 14 life insurers, including those belonging to SBI (SBIN.NS : 2280.1 -17.05 ) and Reliance Anil Ambani Group, from raising any further money from ULIPs unless they are registered with the market watchdog.
Responding to Sebi's directive, IRDA asked insurance companies to ignore the order of the market regulator and continue with business as usual.
Amid the conflicting orders, the Finance Ministry brokered peace between the two regulators and asked them to jointly seek legally binding order from an "appropriate" court over jurisdiction on ULIPs. Till then, status quo ante was restored.
Following the government directive, Sebi allowed insurers to raise money from existing ULIPs, but asked them not to issue fresh ULIPs after April 9, the date when it issued the order banning 14 life insurance companies from raising funds through ULIPs.
ULIPs are insurance products but part of the premium raised through them is invested in stock market. While Sebi regulates the stock market, the working of the insurance companies is overseen by IRDA.
Monday, July 5, 2010
Sebi tightens norms for fund distributors
Capital market regulator, Securities and Exchange Board of India (Sebi), which believes that unit-linked insurance plans should be supervised by it as they contain an investment component, is now gearing up to issue norms for mutual fund distributors.
Sebi chairman CB Bhave has indicated that Sebi will be coming up with new set of guidelines for mutual fund distributors. "Guidelines for MF distributors are on the anvil,” he said speaking to reporters on the sidelines of launch of Application Supported by Blocked Amount (ASBA) by the state-owned lender, Indian Bank, in Mumbai.
It may be recalled that entry loads for mutual fund schemes had been withdrawn in August last year. These loads, paid by the investors were passed on to distributors as commissions.
Meanwhile, Sebi is unhappy over the way the ASBA is being implemented by banks. Expressing concern that ASBA is not being made available, Bhave said that banks should make the facility available at more branches in the 40 cities, which account for 80% of subscriptions. Surprisingly, only 20% of IPO investors were putting their money through ASBA. Banks must ensure that all the branches of the banks falling under those 40 cities were equipped with ASBA facility, said Bhave. The absence of the ASBA facility, in adequate number of bank branches, sub brokers of the stock exchange were feeling left out, said Bhave. Banks must ensure that all the branches of the banks falling under those 40 cities were equipped with ASBA facility, said Bhave. Talking about the benefits of ASBA, Bhave said that it has brought down refund related investor complaints.
On issue of last day bid in IPOs, Bhave said that Sebi has amended issue of capital and disclosure requirement (ICDR), and given a facility to issuers if they so choose, they can close the issue for institutional investors on day X and for other investors on day X+1.
Coming on listing norms for IPO, Bhave hinted that the Sebi was planning to bring down the closure of IPO to 7 days by December, from the currently existing timeframe of 12 days.
Sebi chairman CB Bhave has indicated that Sebi will be coming up with new set of guidelines for mutual fund distributors. "Guidelines for MF distributors are on the anvil,” he said speaking to reporters on the sidelines of launch of Application Supported by Blocked Amount (ASBA) by the state-owned lender, Indian Bank, in Mumbai.
It may be recalled that entry loads for mutual fund schemes had been withdrawn in August last year. These loads, paid by the investors were passed on to distributors as commissions.
Meanwhile, Sebi is unhappy over the way the ASBA is being implemented by banks. Expressing concern that ASBA is not being made available, Bhave said that banks should make the facility available at more branches in the 40 cities, which account for 80% of subscriptions. Surprisingly, only 20% of IPO investors were putting their money through ASBA. Banks must ensure that all the branches of the banks falling under those 40 cities were equipped with ASBA facility, said Bhave. The absence of the ASBA facility, in adequate number of bank branches, sub brokers of the stock exchange were feeling left out, said Bhave. Banks must ensure that all the branches of the banks falling under those 40 cities were equipped with ASBA facility, said Bhave. Talking about the benefits of ASBA, Bhave said that it has brought down refund related investor complaints.
On issue of last day bid in IPOs, Bhave said that Sebi has amended issue of capital and disclosure requirement (ICDR), and given a facility to issuers if they so choose, they can close the issue for institutional investors on day X and for other investors on day X+1.
Coming on listing norms for IPO, Bhave hinted that the Sebi was planning to bring down the closure of IPO to 7 days by December, from the currently existing timeframe of 12 days.
IRDA issues new stringent guidelines for Ulips
Taking extra caution, insurance regulator, Insurance Regulatory & Development Authority (Irda) based upon the insurance related data as of year ending March 31,2010 and related discussions, has issued clarifications on guidelines on unit linked products (Ulips).
All life insurers are advised that only the Ulips, which conform to these revised guidelines, shall be permitted to offer sale from July 1.
IRDA has reiterated that in case of individual products, the minimum policy term shall be five years and group products will continue to be on annually renewable basis. All linked products including pension / annuity products must have a minimum sum assured payable on death.
In case of unit-linked products providing health insurance cover, the provision of death benefit is not mandatory. In addition, no loan shall be granted under Ulips
IRDA has said partial withdrawal is allowed only after fifth policy anniversary for all Ulips except pension/annuity products. In case of unit linked pension/annuity products, no partial withdrawal shall be allowed and the insurer will convert the accumulated fund value into an annuity at maturity.
However, the insured will have the option to commute up to a maximum of one-third of the accumulated value as lump sum at the time of maturity. In the case of surrender, only up to a maximum of one-third of the surrender, value could be availed in lump sum and the remaining amount must be used to purchase an annuity.
Every top-up premium shall have a lock in period of three years from the date of payment of that top up premium. However, top-ups are not allowed during the last three years of the contract.
All life insurers are advised that only the Ulips, which conform to these revised guidelines, shall be permitted to offer sale from July 1.
IRDA has reiterated that in case of individual products, the minimum policy term shall be five years and group products will continue to be on annually renewable basis. All linked products including pension / annuity products must have a minimum sum assured payable on death.
In case of unit-linked products providing health insurance cover, the provision of death benefit is not mandatory. In addition, no loan shall be granted under Ulips
IRDA has said partial withdrawal is allowed only after fifth policy anniversary for all Ulips except pension/annuity products. In case of unit linked pension/annuity products, no partial withdrawal shall be allowed and the insurer will convert the accumulated fund value into an annuity at maturity.
However, the insured will have the option to commute up to a maximum of one-third of the accumulated value as lump sum at the time of maturity. In the case of surrender, only up to a maximum of one-third of the surrender, value could be availed in lump sum and the remaining amount must be used to purchase an annuity.
Every top-up premium shall have a lock in period of three years from the date of payment of that top up premium. However, top-ups are not allowed during the last three years of the contract.
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