Sebi moves court over ULIPs impasse

NEW DELHI: In view of insurance regulator IRDA's decision to challenge Sebi's ban on unit-linked insurance products (ULIPs) in court, the market watchdog on Thursday moved the Supreme Court and some high courts to guard against any ex parte decision. According to highly placed sources, Sebi filed caveats, including inthe high courts of Delhi, Bombay and Hyderabad, but no official comments couldbe obtained from the market regulator. The caveat comes a day afterthe government asked both regulators — Sebi and IRDA — to move courtimmediately to resolve differences over who will have jurisdiction overULIPs.On April 10, Sebi had banned 14 life insurance companies,including those belonging to Tatas, SBI, ICICI, HDFC and the Reliance AnilDhirubhai Ambani Group, from raising funds through Ulips without its approval.However, the Sebi order did not include the state-run insurance majorLIC.IRDA, on the other hand, asked insurers to ignore the Sebi ban,setting the stage for a long-drawn legal battle between the two regulators.On Tuesday, Sebi came out with a second order that exempted existingUlips from the ban, but said its nod was must for issuing newUlips.But defiant insurers, under the umbrella of Life InsuranceCouncil, on Wednesday said they would follow IRDA's directions.TheSebi's action against ULIPs is a result of a long-standing feud between mutualfunds and Ulips. Insurance companies, which started selling Ulips around sixyears ago, offer huge commissions to insurance agents to hardsell Ulips, whichcombine insurance and investment. During the 2005-2008 bull-run, insurancecompanies mopped up large sums through Ulips while mutual funds lost business.Sebi wants Ulips to be regulated by norms similar to those regulating mutualfunds.In December 2009 and January 2010, Sebi had issued show-causenotices to 14 insurance companies asking why action should not be initiatedagainst them for issuing investment products without Sebi's permission.