As the battle between the SEBI and

IRDA
brews in India, a similar

battle is about to begin in the US

What would a mother do when her
two children are fighting on a
single piece of chocolate?
Let them solve the issue internally?
Or

whether the mother will step in

with the mediating decision to
resolve the conflict?
However, that’s not the case to be over here.
In the conflict between the country’s top two
regulators – SEBI (Capital market regulator)
and IRDA (Insurance Regulator) – on the
simmering issue of holding governing rights
over Unit-linked insurance products (ULIP)
SEBI is the regulator for the securities market in
India. It
was formed officially by the Government of India
in 1992
with SEBI Act 1992 being passed by the Indian
Parliament.

Chaired by C B Behave, SEBI is headquartered in the

popular business district of Bandra-Kurla complex
in
Mumbai, and has Northern, Eastern, Southern and
Western regional offices in New Delhi, Kolkata,
Chennai
and Ahmedabad.
Functions and Responsibilities

SEBI has to be responsive to the needs of

three groups, which constitute the market :

 The issuers of securities

 The investors
 The market intermediaries
SEBI has three functions rolled into on body :

 quasi-legislative
 quasi-judicial
 quasi-executive

 It drafts regulations in its legislative capacity, it conducts

investigation and enforcement action in its executive function
and it passes rulings and orders in its judicial capacity.
Though this makes it very powerful.
 SEBI has enjoyed success as a regulator by pushing systemic
reforms aggressively and successively (e.g. the quick movement
towards making the markets electronic and paperless rolling
settlement on T+2 basis).
Insurance Regulatory and Development Authority, the
administrative agency of Government of India for
insurance sector supervision and development

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,

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.“

IRDA formed a high powered Insurance Law Reforms

Committee known as KPN Committee with important
insurance advisors like Mr. N Govardhan and Dr K C
Mishra as its members.
 Duties, Powers and Functions
Section 14 of IRDA Act, 1999 lays down the
duties, powers
and functions of IRDA
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
insurance business and re-insurance business.

Without prejudice to the generality of the

provisions contained in sub-section (1), the
powers and functions .
ULIP is saving-cum-investment product that offers
the
option of life cover along with market liked returns.

These products are increasingly gaining popularity

among the investors on account of its multi-purpose
catering of life cover and equity market linked
returns both.

Additionally, they also provide Tax savings, so they

could
Very called All-in-One Policies.
WHAT IRDA SAYS

• ULIP have a mandatory insurance cover that is a vital and an

inseparable part of each such product.
• Unlike mutual funds, ULIP are linked with the policyholder’s
life.
• Unit Linked Life Insurance business is defined in IRDA
regulation,2000

WHAT SEBI SAYS

• ULIPS are different from traditional insurance products, and

they are a combination of insurance and investment.
• The attributes of the investment component of Ulips are link to
the characteristics of mutual funds.
• Investment component of Ulips carries equity market risks. So,
Ulips need to be registered with and regulated by SEBI.
 Life Insurers’ Stand SEBI’s Contentions

ULIP is a life insurance product not covered Units of mutual funds are “securities” as define
under the definition of securities under the under section 2(h) of the securities contract ac
securities contract Act 1956 1956. merely because they are namely as unit
of ULIPs, they cannot be ousted from the ambi
of definition of “securities”

The predominant feature of a ULIP is If in a combination product there is an

insurance cover, which is dependent on investment component, in any proportion,
human life. The mere existence of an exposing investors
additional investment feature cannot to the risks of equity market, it can be issued
convert a ULIP into a mutual fund. only after obtaining registration from Sebi.
Section 11AA(3) of the Sebi Act excludes ULIPs launched by the said companies are not
contracts of insurance under the insurance purely in the category of “contract of insurance
Act 1938,from the purview of collective but have components of investment products.
investment schemes.
The product was launched after following Approval from one regulatory authority does n
appropriate procedures and obtaining a exempt the company from complying with othe
unique identification number from IRDA, applicable laws and being administered by oth
which is the regulator in case of life relevant regulators.
insurance products. Thus, there is no need
to obtain a certificate of registration from
SEBI.
Unlike a mutual fund, a ULIP is not Section 12(1B) of the Sebi Act says “no person
established in the form of a trust. The fund can sponsor or cause to be sponsored a
As the battle between the SEBI and IRDA
brews in India, a similar battle is about to
begin in the US., Senator Christopher Dodd
of Connecticut introduced a bill in the
Senate that would empower the Commodities
Futures Trading Commission
(CFTC) to regulate
Over-the-counter derivatives market.
 CFTC
 The Commodity Futures Trading Commission (CFTC) is
an independent agency of the United States government.

 More comprehensive regulatory framework for the trading

of futures contracts.

 Mission of the CFTC is to protect market users and the

public from fraud, manipulation, and abusive practices
related to the sale of commodity and financial futures and
options, and to foster open, competitive, and financially
sound futures and option markets.
`
Presented By :
Abhishek Mittal
Gourav Girdher