Sebi drops legal option on Ulips

The Securities and Exchange Board of India (Sebi) has decided against filing a joint application before a court to resolve its dispute with the Insurance Regulatory and Development Authority over unit-linked insurance plans.

In reply to a letter from Irda, Sebi Chairman C B Bhave today said the market regulator does not want to file a joint application. "We do not have anything more to add," sources close to the development said quoting the two-line letter.

The move to approach the court to fix the regulatory jurisdiction over Ulips was part of a government-brokered deal.

The government had to step-in after Sebi's insistence to regulate Ulips led to a row with Irda.

Ulips, which are investment-cum-insurance plans, were until now governed by Irda. Sebi argues it should regulate all plans that invest in the stock markets, since it is the market regulator.

On April 12, the two regulators had agreed to approach a court to resolve the issue. Finance Minister Pranab Mukherjee had also made a statement to this effect.

When Irda wrote to Sebi to decide on the contents of the joint application, the market regulator had agreed to share the cost. But Bhave's letter, sent today, has changed the position.

Irda had proposed that the two regulators approach a court under Section 90 of the Civil Procedure Code. The opinion of a court can be sought on an issue under this section. It had also sought Sebi's opinion on the particular court where the joint application would be filed.

However, the courts could still play a role on the issue, as there are two public interest suits filed against Sebi in various high courts. Hearing of one of these, filed in the Bombay High Court, is due tomorrow.

The sources said Irda has the option to go back to the government and seek its intervention, as the high-level co-ordination committee on financial markets had refused to get involved in the matter.