The Centre on Tuesday introduced the Securities and Insurance Laws (Amendment and Validation) Bill, 2010, in the Lok Sabha to replace the ordinance allowing insurers to sell ULIPs (unit-linked insurance plans) without seeking the approval of market regulator SEBI (Securities and Exchange Board of India).
Apart from seeking to formally set at rest the turf war between SEBI and the Insurance Regulatory and Development Authority (IRDA) by according jurisdictional powers to the insurance regulator over ULIPs — hybrid products which combine life insurance cover with market investments through mutual funds — the Bill provides for setting up a joint mechanism headed by the Finance Minister to resolve any such differences in future among the country's financial regulators, namely, the Reserve Bank of India (RBI), SEBI, IRDA, and the Pension Fund Regulatory and Development Authority (PFRDA).
Introducing the Bill in the Lok Sabha, Finance Minister Pranab Mukherjee said: “As both Houses of Parliament were not in session and immediate action was required to be taken, the President promulgated the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010, on June 18” so as to resolve the differences between SEBI and IRDA.
Alongside, the Bill has also sought to address the apex bank's concerns over hierarchy and autonomy by naming the RBI Governor as Vice-Chairman of the Joint Committee instead of making him just a member.
A memorandum explaining the modifications in the Bill as compared to the ordinance said: “It is proposed to provide that the Governor of the Reserve Bank of India shall be the Vice-Chairman of the Joint Committee instead of a member of the Joint Committee as provided in the Ordinance.” It may be recalled that following the ordinance, RBI Governor D. Subbarao had met the Finance Minister to express the central bank's reservations over the constitution of the joint committee.
As per the Bill, apart from the Union Finance Minister as Chairperson and the RBI Governor as Vice Chairperson, the other members of the joint committee would be Secretary, Department of Economic Affairs, Secretary, Department of Financial Services and the chairmen of SEBI, IRDA and PFRDA.
In another deviation from the ordinance, the Bill has stated that in case of any differences of opinion among the regulators, reference may be made to the joint committee only by any of the respective regulators and not by the government. The Joint Committee would then give its decision over any regulatory conflict within three months of reference to the Central government.
