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Finance ministry pushes for early settlement of Irda-Sebi tussle
THE government has backed market regulator Sebi's decision to bar 14 insurance companies from issuing new unit-linked schemes or products. The finance ministry on Wednesday said directions issued by Sebi on April 13 were in line with the agreement worked out with the insurance regulator. "FM had mentioned status quo ante on Monday. I assume that will mean whatsoever was on the particular day will stay and prevail. This is what Sebi has said," finance secretary Ashok Chawla said.
This dispels the notion that Sebi's direction stopping the 14 insurance companies from launching new Ulip schemes/products while it kept its earlier order in abeyance marked a further escalation in the dispute between the two regulators. "It is not as if new insurance schemes cannot be launched," Mr Chawla said. The clarification came after finance minister Pranab Mukherjee held discussions with senior finance ministry officials to study the latest Sebi order. Mr Chawla and R Gopalan, secretary, department of financial services and other official of the ministry were present at the hour-long meeting.
Insurance regulator Irad had reacted strongly to Sebi's Tuesday order. "We will continue to approve insurance products as these fall within the ambit of insurance regulation," Irda member R Kannan had said. Mr Chawla said the government wants both the regulators to go the court at the earliest. "The larger issue of who has the regulatory jurisdiction and oversight authority over Ulips will be decided by the court. The matter should be resolved as early as possible," he said.
"There will be no difficulty for the existing investors in relation to the existing schemes. The idea was that investors should not suffer till the issue is settled", he added. Existing schemes can also take fresh subscription from investors. Asked about the other nine entities that were issued show cause notices, Mr Chawla said process takes its own time. Ulip is a complex investment-cuminsurance product that combines the features of MFs and insurance. Sebi had said that Ulips of entities it had identified were 'prima facie' like MF schemes and they should have taken the regulator's permission before launching them.
Call for stability body grows
The proposed Financial Stability and Development Council has found an influential backer in the government amid a regulatory dispute over unit-linked insurance plans. Deputy chairman of the planning commission Montek Singh Ahluwalia has said that the council is important for the economy as it would be able to ensure macro-prudential stability to protect it from systemic shocks. "The establishment of the development council is actually the recognition of the fact that people are now not just interested in micro-prudential stability, but also macro prudential stability," Mr Ahluwalia said at the sidelines of an international conference on dynamics of rural transformation in emerging economies on Wednesday.
Proposing the FSDC, the FM had said in budget speech:"Without prejudice to the autonomy of regulators, this council would monitor macro prudential supervision of the economy, including the functioning of large financial conglomerates, and address inter-regulatory coordination issues."
The need for such a body seems to have become urgent. Securities and Exchange Board of India (Sebi) and Insurance Regulatory Development Authority (IRDA) are locked in a bitter dispute over regulation of unit linked insurance plans (ULIPs). Endorsing the role of the proposed council in sorting out regulatory disputes, Mr Ahluwalia said, "The council can also deal with issues of regulatory overlap of jurisdiction." The current dispute between IRDA and Sebi will be resolved through courts. The reason for these disputes, he said, was because parts of the financial system has developed at different times. As a result there are regulatory gaps.
Source: http://epaper.timesofindia.com/
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