No new ULIPs for now, SEBI tells insurance firms

Capital market regulator Securities and Exchange Board of India (SEBI), which on Monday made a climbdown by lifting a ban it imposed on 14 insurance companies from issuing unit linked insurance policies (ULIPs), today issued a fresh order restraining these insurance companies from issuing or seeking to issue new ULIPs.

The order passed by a SEBI wholetime member on 9 April, "restrains the 14 entities from issuing any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new and/or additional subscription for any product (including ULIPs) having an investment component in the nature of mutual funds, till they obtain the requisite certificate of registration from SEBI."

SEBI said the order will come into force with immediate effect, ie, from 9 April 2010 and that the enforcement of the above order will be kept in abeyance with respect to the ULIP schemes /products existing on the date of the order, ie, 9 April 2010.

However, with respect to any new ULIP schemes / products launched after 9 April 2010, the directions mentioned in the above order will be enforced as indicated therein, SEBI said.

The regulator said the 14 insurance companies have been informed of the decision separately.

Finance minister Pranab Mukherjee, who yesterday said the two sectoral regulators have agreed to seek legal mandate to solve the issue, today pretended ignorence over the developments.

"I do not know what circular they have issued. It is to be examined, but both of them (SEBI and insurance regulator IRDA) agreed on Monday to resolve the issue by referring the matter to the competent court and the interpretation which will be given by the court will be binding to both of them," he told reporters on the sidelines of a function in Gurgaon.

The Insurance Regulatory Development Authority (IRDA) had earlier asked the insurance companies to ignore SEBI's ban order and continue their business as usual, forcing the government to intervene and broker a truce.