SEBI nod must for new ULIP
A day after Finance Minister Pranab Mukherjee said that unit linked insurance plan (ULIP) sales can go on for now, capital markets regulator Securities and Exchange Board of India (SEBI) on Tuesday passed another order according to which SEBI’s April 9 order, restraining sale of ULIPs, will remain applicable on new ULIPs launched after April 9.business Updated: Apr 13, 2010 21:02 IST
A day after Finance Minister Pranab Mukherjee said that unit linked insurance plan (ULIP) sales can go on for now, capital markets regulator Securities and Exchange Board of India (SEBI) on Tuesday passed another order according to which SEBI’s April 9 order, restraining sale of ULIPs, will remain applicable on new ULIPs launched after April 9.
“SEBI has decided to keep in abeyance, till further notice, the enforcement of the above directions with respect to the ULIP schemes,” SEBI’s quasi-judicial order said. “However, with respect to any new ULIP schemes launched after April 9, the directions mentioned in the said order will be enforced as indicated therein.”
Insurers are hurting. “On an average, life insurance companies launch three to four new ULIPs every year and this will impact our fund raising and continuous activity in the market,” said a senior official at an insurance company on condition of anonymity.
SEBI on Friday had passed a quasi-judicial order restraining 14 life insurance players from receiving money from investors for any product that has an investment component attached to it till the time they get registered with it.
The next day, insurance regulator Insurance Regulatory and Development Authority (IRDA) directed insurance companies to ignore the order and go ahead with the sale of ULIPs.
While IRDA and insurance companies continue to resist SEBI’s quasi-judicial order, Mukherjee on Monday said that he expects all financial sector regulators to work towards the goal of no load model for the entire financial sector.
Earlier, the government-appointed High Level Co-ordination Committee on Capital Markets (HLCCM) headed by Dhirendra Swarup, former chairman, Pension Fund regulatory and Development Authority (PFRDA) submitted a report to the finance ministry, where it recommended eliminating upfront commission in a phased manner by April 2011.
Mukherjee on Monday strengthened that idea. “SEBI decision to make mutual fund advisor an agent of customer other than that of the company whose products they sell would go long way in protecting the small investor,” he said.
“India could set global model for a no-load fee model for entire financial sector to ensure fair deal to all market participants. I hope all financial sector regulators would work towards this.”
Swarup lauded the development. “This marks the beginning of change,” he said. “This will in the best interest of the investors. While it will create a level playing field for various financial sectors it will lead them to compete on merit.”