Corporate affairs minister Salman Khurshid yesterday downplayed fears that investors would lose confidence due to the row between stock market regulator Securities and Exchange Board of India and the Insurance Regulatory and Development Authority over market-linked insurance policies, as the issue will be resolved in favour of either one regulator or the other by the courts.
"Investors will have confidence that at the end of the day, even if there is disagreement between regulators, one regulator will prevail (over the unit-linked insurance products issue). It's only a matter of time. So investors need not worry," Khurshid told reporters on the sidelines of an Assocham event on transparency and accountability in New Delhi.
He said the regulators are new institutions and there are bound to be overlaps in their functioning.
"There are overlap rules that are supposed to apply ... engagement rules ... if we find there is a gap in engagement rules, we clarify. I think that is what the finance ministry wanted to do, either do itself or let courts do it. In this case, the finance ministry seems to have suggested that let the courts decide the overlap rules," he said.
Giving a hypothetical example, Khurshid said conflict may arise between the Competition Commission of India and SEBI or the Central Electricity Regulatory Commission, but engagement rules are supposed to resolve these issues.
"Everywhere, in the Competition Commission for instance, there will be an overlap with SEBI, Electricity Commission, and we have engagement rules. They are supposed to resolve any such issue, any potential or actual conflict. It is not an impossible task," he said.
The conflict between SEBI and IRDA arose when the former banned 14 life insurers from raising money from ULIPs, following which the latter asked the companies to ignore the order. Subsequently, the finance ministry intervened and the two regulators agreed to jointly seek a legally binding mandate from the court as to who has jurisdiction over ULIPs. Till then, status quo ante was restored by the finance ministry.
After the agreement, SEBI amended its order and banned only new ULIPs launched after 9 April, when the first order of SEBI was issued. IRDA, however, asked the companies to ignore this directive as well.