SlideShare ist ein Scribd-Unternehmen logo
1 von 11
WTM/ PS /IMD/06/APR/2010


       BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA
            CORAM: PRASHANT SARAN, WHOLE TIME MEMBER


                                      ORDER


DIRECTIONS UNDER SECTIONS 11 and 11B OF THE SECURITIES AND
EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH SECTION 12(1B)
THEREOF.


1. It has been noticed that the following entities have launched several Unit Linked
   Insurance Products (ULIPs) :-
   a. Aegon Religare Life Insurance Company Limited
   b. Aviva Life Insurance Company India Limited
   c. Bajaj Allianz Life Insurance Company Limited
   d. Bharti AXA Life Insurance Company Limited
   e. Birla Sun Life Insurance Company Limited
   f. HDFC Standard Life Insurance Company Limited
   g. ICICI Prudential Life Insurance Company Limited
   h. ING Vyasa Life Insurance Company Limited
   i. Kotak Mahindra Old Mutual Life Insurance Limited
   j. Max New York Life Insurance Co. Limited
   k. Metlife India Insurance Company Limited
   l. Reliance Life Insurance Company Limited
   m. SBI Life Insurance Company Limited
   n. TATA AIG Life Insurance Company Limited


2. Since, the ULIPs launched by the abovesaid entities were prima facie found to be
   akin to the mutual fund schemes and were launched without obtaining registration
   from the Securities and Exchange Board of India (hereinafter referred to as “SEBI”)



                                                                                    1
under the Securities and Exchange Board of India Act, 1992 (hereinafter referred to
   as “the SEBI Act”) and the regulations made thereunder, notices were issued to these
   entities on January 15, 2010 (except in case of HDFC Standard Life Insurance
   Company Limited where the notice was issued on December 14, 2009). SEBI had
   sought replies from the said entities as to how the ULIPs were launched without
   obtaining the requisite certificate of registration from SEBI and why appropriate
   action should not be taken against them under the provisions of the SEBI Act.


3. The entities replied to the aforementioned notices, inter alia, stating that:
   a. sub-section (2) and (3) of section 11AA of the SEBI Act provide for conditions
       for any scheme or arrangement to be classified as collective investment schemes
       and exceptions to the sub-section (2) of section 11AA of the SEBI Act, 1992
       respectively.
   b. section 11AA (3) excludes contracts of insurance under the Insurance Act, 1938
       from the purview of collective investment schemes.
   c. ULIP is a life insurance product and not covered under the definition of
       “securities” under the Securities Contracts (Regulation) Act, 1956.
   d. the predominant feature of a ULIP is insurance cover which is dependent on
       human life and the mere existence of an additional investment feature cannot
       convert a ULIP into a mutual fund.
   e. ULIPs have a mandatory insurance cover which forms a vital and inseparable part
       of every ULIP.
   f. unlike mutual fund schemes, the linked products are interlinked with the life of
       the policy holder.
   g. under a ULIP units are only notionally allocated and not physically issued and the
       units are created for the purpose of determining the benefits payable under the
       policy and are not owned by the policyholder.
   h. under a ULIP only the risk on the investment portion lies with the policyholder
       while the risk on the life insurance portion vests with the insurer.
   i. mutual fund units can be transferred or traded freely whereas the rights and
       benefits under ULIPs are transferable or assignable only for limited purpose.



                                                                                       2
j. Unlike a mutual fund, a ULIP is not established in the form of a trust. The fund is
       held by the insurance company itself as required under the Insurance Act.
       Ancillary features such as fund management, fund management charges etc., are
       alone not sufficient to convert a life insurance product into a mutual fund scheme.
   k. A ULIP is an insurance contract falling within the ambit of life insurance
       business. “Life Insurance business” is defined under Section 2(11) of the
       Insurance Act, 1938 inter alia to mean the ‘business of effecting contracts of
       insurance upon human life’ or ‘the happening of any contingency dependent on
       human life’. The said definition indicates that the policy is dependent on the
       happening or the non-happening of an event linked to human life.
   l. ULIPs fall under the definition of Life Insurance products. Unit Linked Life
       Insurance Business is defined in IRDA (Investment) Regulations, 2000.
       Regulation 3(3) states “every insurer shall invest and at all times keep invested
       his segregated fund of units linked life insurance business as per pattern of
       investment offered to and approved by the policy holders….”
   m. “Linked business” is defined in IRDA (Registration of Companies) Regulations,
       2000 which means life insurance contracts or health insurance contracts under
       which benefits are wholly or partly to be determined by reference to the
       underlying assets or any approved index.
   n. the product was launched after following appropriate procedures and obtaining
       unique identification number from IRDA, which is the regulator in case of life
       insurance products. Thus, there was no need to obtain requisite certificate of
       registration from SEBI.


4. Before considering the issues involved in the matter, I refer to the relevant provision
   of the SEBI Act. Section 12(1B) of the SEBI Act provides as under:


       “No person shall sponsor or cause to be sponsored or carry on or caused to be
       carried on any venture capital funds or collective investment schemes including
       mutual funds, unless he obtains a certificate of registration from the Board in
       accordance with the regulations.”



                                                                                         3
5. I have carefully considered the replies of each of the entities, product brochures of
   various ULIPs offered by them and the relevant material available on record. Since
   the subject matter in the notices issued to the entities is identical and their replies are
   substantially similar, I proceed to deal with issues involved in the matter by way of a
   common order. Some of the entities have also sought an opportunity of personal
   hearing. I note that each entity has been served with separate notices and each of them
   has availed of the opportunity of making its written submissions. Therefore, under
   facts and circumstances of the case, I do not consider necessary to give an
   opportunity of personal hearing to the entities in the matter.


6. The question that arises for my consideration is whether ULIPs offered by the said
   entities are a combination of investment and insurance and if so whether the
   investment components are in the nature of mutual funds which can only be
   offered/launched after obtaining registration from SEBI under section 12(1B) of the
   SEBI Act?


7. From the examination of the product documents of such ULIPs, it is noted that in
   addition to the insurance component, the ULIPs also have inter alia the following
   characteristics –
   a. the product is unit linked and money is raised from public through sale of units
       to them.
   b. the investment risk in chosen investment portfolio is borne by investors.
   c. upon untimely death before the expiration date of the policy the policy holder
       will be paid either the NAV (Unitized Fund Value) or the sum assured
       whichever is higher.
   d. upon survival at the maturity of the policy, the policy holder will be paid the
       NAV (Unitized Fund value) of the investments.
   e. premium will be used to allocate units in the fund chosen by the investor.
   f. the product has characteristics such as fund management, fund management
       charges, switch and partial withdrawal options.



                                                                                            4
8. It is observed that the various ULIPs launched/offered by these entities offer
   investment options with varying degrees of exposure to equity and debt. It is also
   noted that in their product brochure for ULIPs, the entities have under the heading
   “risks of investments”, inter alia, disclosed and declared that:
   a. unit linked life insurance products are different from traditional insurance
       products and are subject to risk factors.
   b. the premium paid in unit linked life insurance policies are subject to investment
       risks associated with capital markets and the unit price of the units may go up or
       down based on the performance of the fund and factors influencing the capital
       market and the insured/policyholder is responsible for his/her decisions.


9. From the above, I find that the attributes of the ULIPs launched/offered by these
   entities are different from the traditional insurance products and they are a
   combination of insurance and investment. The attributes of the investment component
   of ULIPs launched by these entities are akin to the characteristics of mutual funds
   which issue units to the investors and provide exit at net asset value of the underlying
   portfolio. The investment component of ULIPs is subject to investment risks
   associated with securities markets which are entirely borne by the investors. I also
   find that the entities by their own admission have stated that there are two
   components of ULIPs - an insurance component where the risk on the life insurance
   portion vests with the insurer and the investment component where the risk lies with
   the investor. This establishes conclusively that ULIPs are a combination product and
   the investment component need to be registered with and regulated by SEBI.


10. Now I proceed to deal with the specific contentions raised by the aforesaid entities.


11. Some of the entities have pleaded that the regulations issued by IRDA are special
   laws for ULIPs and SEBI cannot apply the general laws applicable to tradeable
   securities such as collective investment schemes or mutual funds to ULIPs. In this
   regard, I find that in terms of section 11(1) of the SEBI Act one of the duties of SEBI
   is to protect the interests of the investors in securities and to promote the development



                                                                                            5
of, and to regulate, the securities market by such measures as it thinks fit. Section
   11(2) of the SEBI Act enumerates certain illustrative measures which can be taken by
   SEBI without prejudice to the provision of sub-section (1). One such measure is
   registering and regulating the working of collective investment schemes including
   mutual funds. To carry out the purposes of sections 11 and 12(1B), SEBI has framed
   various regulations including the Securities and Exchange Board of India (Mutual
   Funds) Regulations, 1996 and the Securities and Exchange Board of India (Collective
   Investment Scheme) Regulations, 1999. The SEBI Act and the regulations made
   thereunder are also special laws made/laid before the Parliament and any investment
   product or investment contract having any characteristic of securities or exposing
   investors to securities market risks is under the jurisdiction of SEBI under the SEBI
   Act.


12. It is also contended that a mutual fund is a fund established in the form of a trust for
   raising money through the sale of units through the public and established under one
   or more schemes for investing in securities. I find that in terms of section 12(1B) of
   the SEBI Act “no person” can sponsor or cause to be sponsored a collective
   investment scheme including a mutual fund unless he has been registered with SEBI
   under the SEBI Act. I note that the emphasis is on the prior registration with SEBI
   under the SEBI Act, notwithstanding who that person is. Therefore, an entity which is
   not established in the form of a trust cannot launch or offer an investment product in
   the nature of mutual fund without being registered with SEBI. The structure of the
   entity is immaterial for compliance of section 12(1B) of the SEBI Act. For seeking
   registration such person has to establish a trust for launching mutual fund schemes.
   Thus, the “trust” structure is not a condition for compliance of section 12(1B) of the
   SEBI Act though it is a requirement for getting registered as a mutual fund.


13. It is also contended by the said entities that ULIPs are predominantly life insurance
   products having an investment component. In my opinion, if in a combination product
   there is an investment component, in any proportion, exposing investors to risks of




                                                                                          6
securities market products, it can be issued only after obtaining registration from
   SEBI and compliance of the applicable laws with respect to such component.


14. The entities have contended that the predominant feature of a ULIP is insurance cover
   which is dependent on human life and the mere existence of an additional investment
   feature cannot convert a ULIP into a mutual fund. Further, it has been said that ULIPs
   have a mandatory insurance cover which forms a vital and inseparable part of every
   ULIP. In this regard I note from one of the products offered by one of the entities that
   for a sum assured of Rs. 15,00,000/- an annual premium of Rs. 1,50,000/- is collected
   for 10 years. The premium allocated for insurance out of this is Rs. 7500/- in the first
   year and Rs. 3000/- in subsequent years. (The annual premium for a term plan for 10
   years for an identical sum assured for an identical life assured by the same company
   is Rs. 3,342/-) Here, the insurance component is 2% of the premium paid. The
   products offered by other entities also follow a broadly similar pattern. Thus, the
   argument that insurance is both predominant and inseparable in a ULIP fails.


15. Some of the entities have contended that even if the ULIP is construed to be a mutual
   fund the existing mutual fund regulations lay down terms and conditions which
   cannot be complied with by life insurance companies while issuing ULIPs. Further, if
   SEBI can regulate ULIPs, the SEBI Regulations as they currently stand cannot be
   applied to the unique features of ULIP and since SEBI has not provided any guidance
   for insurance companies, they cannot be penalized for any non compliance. I find it
   unacceptable and untenable that having admitted ULIP as combination product with
   an investment component, the issuers expect that they be allowed not to comply with
   the existing Mutual Fund Regulations. The substance and spirit of SEBI Act and
   regulations framed thereunder makes an over arching emphasis on investor
   protection. It is imperative and incumbent upon every entity to comply with the
   regulations. In my view, such products attract the SEBI Regulations and the entities
   must seek registration from SEBI for launching such products. The existing
   regulations have detailed scheme and procedure for registration and regulation of




                                                                                         7
mutual funds. Framing of special regulations for ULIPs under section 12 (1B) is not a
   pre-requisite for compliance of said section.


16. It is noted that in some of its ULIPs, the entities offer the investors the guarantee to
   encash the units at maturity at the highest unit price achieved by the fund over the
   term of the policy. This reinforces that the ULIPs launched/offered by these entities
   are a combination of insurance and investment. From the examination of the product
   documents of the ULIPs and the investment options offered therein by the entities it is
   noted that:
   a. the contributions or payments made by the investor are pooled;
   b. the contributions or payments are made to such ULIPs by the investor with a view
       to receive profits, income;
   c. the investment made by the investor in the ULIPs is managed on behalf of the
       investor;
   d. the investor do not have day to day control over the management and operation of
       the ULIPs.
   The aforementioned attributes are those of a collective investment scheme and also of
   the mutual funds.


17. It is contended that section 11AA (3) of the SEBI Act excludes ‘contracts of
   insurance’ from the purview of a collective investment scheme as enumerated under
   section 11AA (2) of the SEBI Act. From the perusal of the product brochures of the
   ULIPs it is noted that the said products are combination of investment and insurance.
   The investor chooses between the options and decides as to how much be allocated
   toward buying insurance and how much be allocated towards investment. The ULIPs
   have a component of investment product and carry with themselves securities market
   risk which is borne by the investors. I find that the ULIPs launched/offered by the
   said entities are not purely in the category of “contracts of insurance” but have
   components of investment products.




                                                                                          8
18. It is also contended that the contracts of insurance are exempt from the purview of a
   collective investment scheme under section 11AA (3) of the SEBI Act. Here, it is
   necessary to clearly understand the nature of collective investment schemes as
   referred to in the section 11AA of SEBI Act. Collective investment schemes have
   characteristics defined in Section 11AA (2); viz. pooled investments, investors not
   participating in day to day control of investments etc. However, in terms of Section
   11AA (3), collective investment schemes exclude all types of schemes/arrangements
   which have financial bearing. viz. deposits taken by non-banking financial
   companies, contracts of insurance, pension schemes and also mutual funds. Thus the
   argument that Section 11AA (3) exempts insurance contracts from the purview of
   collective investment schemes does not in any way exempt ULIPs which are a
   combination of insurance and investment from Mutual Fund Regulations.


19. The entities have contended that ULIPs are an insurance contract falling within the
   ambit of life insurance business and have quoted Section 2(11) of Insurance Act in
   this regard. It has been established in the preceding paragraphs that ULIPs are a
   combination of insurance and investment. Therefore, in my opinion, they must be
   regulated under relevant/applicable Acts and Regulations. The investment component
   should be registered with and regulated by SEBI.


20. It has been contended that ULIPs are a life insurance product and life insurance
   products are not covered under Securities Contracts (Regulations) Act, 1956. Units of
   ULIPS have the characteristics of units of mutual funds. Units of mutual funds are
   “securities” as defined under Section 2 (h) of Securities Contracts (Regulations) Act,
   1956. Merely because they are named as units of ULIPs, such units cannot be ousted
   from the ambit of definition of “securities”.

21. The entities have also contended that units issued under ULIPs are not freely
   transferable or have transferability for limited purpose, therefore, they are not units of
   mutual funds. I find that not all the units of mutual funds are transferable, e.g., in the
   case of open ended schemes of mutual fund the investor subscribes to and redeems



                                                                                           9
from the mutual fund directly. The units of an open ended mutual fund scheme are,
   therefore, not transferable. Further, not in all cases are the units of mutual fund
   schemes issued physically. I note that it is common among mutual funds to issue
   statements of accounts. Therefore, the contentions in these regards are misconceived.


22. I find that the attributes of ULIPs launched/offered by the aforesaid entities have
   components of mutual fund schemes. As discussed above, in spirit and substance, the
   ULIPs have characteristics of mutual fund schemes and the arguments forwarded by
   the entities have no merit. It is, therefore, necessary from the point of view of
   protecting the interest of investors that such products should be offered/launched after
   obtaining requisite certificate of registration from SEBI under the SEBI Act.


23. The entities have contended that their policies were launched after following
   appropriate procedures and obtaining requisite permission from IRDA, which is the
   regulator in case of life insurance products. The approval/registration from one
   regulatory authority does not exempt the entity from complying with other applicable
   laws administered by relevant regulators.


24. In view of the above, I conclude that ULIPs offered by the said entities are a
   combination of investment and insurance and, therefore, the investment components
   are in the nature of mutual funds which can only be offered/launched after obtaining
   registration from SEBI under section 12(1B) of the SEBI Act.


25. However, the said entities have not obtained any certificate of registration from SEBI
   though the ULIPs launched by them had an investment component in the nature of
   mutual funds, as mandated by section 12(1B) of the SEBI Act. It is, therefore,
   necessary to restrain the entities mentioned in para 1 of this order from raising further
   monies/subscription, new and/or additional, from the investors for any product
   (including ULIPs) having an investment component in the nature of mutual funds till
   they obtain registration from SEBI.




                                                                                         10
26. Accordingly, in exercise of the powers conferred upon me by virtue of section 19 of
   the SEBI Act read with sections 11, 11B and 12(1B) thereof, I hereby direct the
   entities mentioned in para 1 of this order not to issue 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. This order is without
   prejudice to any action that might be taken by SEBI in respect of offer documents or
   advertisements issued by these entities for products (including ULIPs) having an
   investment component in the nature of mutual funds launched so far.


27. This order will not affect soliciting money/subscription from public with respect to
   any pure contract of insurance or the insurance component of a combination product.


28. This order shall come into force with immediate effect.




DATE: April 9, 2010                                             PRASHANT SARAN
PLACE: MUMBAI                                                 WHOLE TIME MEMBER
                              SECURITIES AND EXCHANGE BOARD OF INDIA




                                                                                     11

Weitere ähnliche Inhalte

Was ist angesagt?

Laws Under Life Insurance Sector
Laws Under Life Insurance SectorLaws Under Life Insurance Sector
Laws Under Life Insurance SectorRishebh Clement
 
History Of Insurance
History Of InsuranceHistory Of Insurance
History Of InsuranceNisha Karkera
 
Ration analysis on lic & icici
Ration analysis on lic & iciciRation analysis on lic & icici
Ration analysis on lic & icicihemant sonawane
 
life-insurance-project-on-sales
 life-insurance-project-on-sales life-insurance-project-on-sales
life-insurance-project-on-salessukesh gowda
 
Introduction to Life Insurance-II by Dr. Amitabh Mishra
Introduction to Life Insurance-II by Dr. Amitabh MishraIntroduction to Life Insurance-II by Dr. Amitabh Mishra
Introduction to Life Insurance-II by Dr. Amitabh MishraDr. Amitabh Mishra
 
Indian Insurance Industry - Recent Industry Trends - Part - 5
Indian Insurance Industry - Recent Industry Trends - Part - 5Indian Insurance Industry - Recent Industry Trends - Part - 5
Indian Insurance Industry - Recent Industry Trends - Part - 5Resurgent India
 
Lic products and policies
Lic products and policiesLic products and policies
Lic products and policiesInvest Inn Pune
 
Insurance sector in india
Insurance sector in indiaInsurance sector in india
Insurance sector in indiaBikramjit Singh
 
Insurance sector in india by lekshmi narayanank
Insurance sector in india by lekshmi narayanankInsurance sector in india by lekshmi narayanank
Insurance sector in india by lekshmi narayanankLekshmi Narayanan
 
Financial Analysis of Insurance Company
Financial Analysis of Insurance CompanyFinancial Analysis of Insurance Company
Financial Analysis of Insurance CompanyAbdullah Al Noman
 
Life insurance
Life insuranceLife insurance
Life insurancerachel75
 
Insurance Sector In India
Insurance Sector In IndiaInsurance Sector In India
Insurance Sector In Indiavijayverma767
 
Trends in insurance sector
Trends in insurance sectorTrends in insurance sector
Trends in insurance sectorsam5590
 
An overview of life insurance sector. (1)
An overview of life insurance sector. (1)An overview of life insurance sector. (1)
An overview of life insurance sector. (1)ankan sengupta
 
Introduction to insurance
Introduction to insuranceIntroduction to insurance
Introduction to insuranceyogesh ingle
 

Was ist angesagt? (20)

Laws Under Life Insurance Sector
Laws Under Life Insurance SectorLaws Under Life Insurance Sector
Laws Under Life Insurance Sector
 
History Of Insurance
History Of InsuranceHistory Of Insurance
History Of Insurance
 
Insurance Sector
Insurance SectorInsurance Sector
Insurance Sector
 
Ration analysis on lic & icici
Ration analysis on lic & iciciRation analysis on lic & icici
Ration analysis on lic & icici
 
life-insurance-project-on-sales
 life-insurance-project-on-sales life-insurance-project-on-sales
life-insurance-project-on-sales
 
Insurance companies
Insurance companiesInsurance companies
Insurance companies
 
Introduction to Life Insurance-II by Dr. Amitabh Mishra
Introduction to Life Insurance-II by Dr. Amitabh MishraIntroduction to Life Insurance-II by Dr. Amitabh Mishra
Introduction to Life Insurance-II by Dr. Amitabh Mishra
 
Indian Insurance Industry - Recent Industry Trends - Part - 5
Indian Insurance Industry - Recent Industry Trends - Part - 5Indian Insurance Industry - Recent Industry Trends - Part - 5
Indian Insurance Industry - Recent Industry Trends - Part - 5
 
Lic products and policies
Lic products and policiesLic products and policies
Lic products and policies
 
Insurance sector in india
Insurance sector in indiaInsurance sector in india
Insurance sector in india
 
Insurance sector in india by lekshmi narayanank
Insurance sector in india by lekshmi narayanankInsurance sector in india by lekshmi narayanank
Insurance sector in india by lekshmi narayanank
 
Financial Analysis of Insurance Company
Financial Analysis of Insurance CompanyFinancial Analysis of Insurance Company
Financial Analysis of Insurance Company
 
Life insurance
Life insuranceLife insurance
Life insurance
 
Insurance Sector In India
Insurance Sector In IndiaInsurance Sector In India
Insurance Sector In India
 
Trends in insurance sector
Trends in insurance sectorTrends in insurance sector
Trends in insurance sector
 
Apar
AparApar
Apar
 
Insurance Sector Report July 2017
Insurance Sector Report July 2017Insurance Sector Report July 2017
Insurance Sector Report July 2017
 
An overview of life insurance sector. (1)
An overview of life insurance sector. (1)An overview of life insurance sector. (1)
An overview of life insurance sector. (1)
 
Introduction to insurance
Introduction to insuranceIntroduction to insurance
Introduction to insurance
 
Insurance sector
Insurance sectorInsurance sector
Insurance sector
 

Andere mochten auch

Restricted countries for NRI Investments - Mutual Funds
Restricted countries for  NRI Investments - Mutual FundsRestricted countries for  NRI Investments - Mutual Funds
Restricted countries for NRI Investments - Mutual FundsThe Financial Literates
 
Committee On Investor Awareness & Protection(Report 2009)
Committee On Investor Awareness & Protection(Report 2009)Committee On Investor Awareness & Protection(Report 2009)
Committee On Investor Awareness & Protection(Report 2009)The Financial Literates
 
Franklin templeton family solutions plan
Franklin templeton family solutions planFranklin templeton family solutions plan
Franklin templeton family solutions planThe Financial Literates
 
Lic jeevan ankur ppt - emotional atyachar
Lic jeevan ankur ppt - emotional atyacharLic jeevan ankur ppt - emotional atyachar
Lic jeevan ankur ppt - emotional atyacharThe Financial Literates
 
Sbi gold fund presentation - think before you invest
Sbi gold fund presentation - think before you investSbi gold fund presentation - think before you invest
Sbi gold fund presentation - think before you investThe Financial Literates
 
Insurance Companies Death Claim Settlement Ratio
Insurance Companies Death Claim Settlement RatioInsurance Companies Death Claim Settlement Ratio
Insurance Companies Death Claim Settlement RatioThe Financial Literates
 
Comparison of various product of individual health insurance companies in india
Comparison of various product of individual health insurance companies in indiaComparison of various product of individual health insurance companies in india
Comparison of various product of individual health insurance companies in indiaThe Financial Literates
 
Franklin Templeton Family Solutions Presentation
Franklin Templeton Family Solutions PresentationFranklin Templeton Family Solutions Presentation
Franklin Templeton Family Solutions PresentationThe Financial Literates
 

Andere mochten auch (20)

Tfl In Media
Tfl In MediaTfl In Media
Tfl In Media
 
Restricted countries for NRI Investments - Mutual Funds
Restricted countries for  NRI Investments - Mutual FundsRestricted countries for  NRI Investments - Mutual Funds
Restricted countries for NRI Investments - Mutual Funds
 
Tata retirement presentation
Tata retirement   presentationTata retirement   presentation
Tata retirement presentation
 
Capital protection oriented fund
Capital protection oriented fundCapital protection oriented fund
Capital protection oriented fund
 
Weekly SIP/STP Mutual Fund
Weekly SIP/STP Mutual FundWeekly SIP/STP Mutual Fund
Weekly SIP/STP Mutual Fund
 
Irda On Ulip Ban
Irda On Ulip BanIrda On Ulip Ban
Irda On Ulip Ban
 
Stop Fooling Investors
Stop Fooling InvestorsStop Fooling Investors
Stop Fooling Investors
 
Stop Fooling Investors
Stop Fooling InvestorsStop Fooling Investors
Stop Fooling Investors
 
Lic Wealth Plus Misselling
Lic Wealth Plus MissellingLic Wealth Plus Misselling
Lic Wealth Plus Misselling
 
Committee On Investor Awareness & Protection(Report 2009)
Committee On Investor Awareness & Protection(Report 2009)Committee On Investor Awareness & Protection(Report 2009)
Committee On Investor Awareness & Protection(Report 2009)
 
Speak asia
Speak asia Speak asia
Speak asia
 
Franklin templeton family solutions plan
Franklin templeton family solutions planFranklin templeton family solutions plan
Franklin templeton family solutions plan
 
Financial Lessons from TFL
Financial Lessons from TFLFinancial Lessons from TFL
Financial Lessons from TFL
 
Lic jeevan ankur ppt - emotional atyachar
Lic jeevan ankur ppt - emotional atyacharLic jeevan ankur ppt - emotional atyachar
Lic jeevan ankur ppt - emotional atyachar
 
Sbi gold fund presentation - think before you invest
Sbi gold fund presentation - think before you investSbi gold fund presentation - think before you invest
Sbi gold fund presentation - think before you invest
 
Insurance Companies Death Claim Settlement Ratio
Insurance Companies Death Claim Settlement RatioInsurance Companies Death Claim Settlement Ratio
Insurance Companies Death Claim Settlement Ratio
 
STP Information
STP InformationSTP Information
STP Information
 
Comparison of various product of individual health insurance companies in india
Comparison of various product of individual health insurance companies in indiaComparison of various product of individual health insurance companies in india
Comparison of various product of individual health insurance companies in india
 
Lic jeevan vriddhi presentation
Lic jeevan vriddhi presentationLic jeevan vriddhi presentation
Lic jeevan vriddhi presentation
 
Franklin Templeton Family Solutions Presentation
Franklin Templeton Family Solutions PresentationFranklin Templeton Family Solutions Presentation
Franklin Templeton Family Solutions Presentation
 

Ähnlich wie Ulip Ban: Sebi Order

Insurance as a investment tool @ icici bank project report mba finance
Insurance as a investment tool @ icici bank project report mba financeInsurance as a investment tool @ icici bank project report mba finance
Insurance as a investment tool @ icici bank project report mba financeBabasab Patil
 
A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...
A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...
A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...Projects Kart
 
Stress management project report @ icici bank
Stress management project report @ icici bank Stress management project report @ icici bank
Stress management project report @ icici bank Babasab Patil
 
Legal Framework of Takaful
Legal Framework of TakafulLegal Framework of Takaful
Legal Framework of TakafulMahyuddin Khalid
 
Emerging dimensions of insurance sector and analytics
Emerging dimensions of insurance sector  and analyticsEmerging dimensions of insurance sector  and analytics
Emerging dimensions of insurance sector and analyticsPrashant Mehta
 
Judgement against SBI Life
Judgement against SBI LifeJudgement against SBI Life
Judgement against SBI LifeDeepak Shenoy
 
Joint-ic-cda-sec-mc01-2010
Joint-ic-cda-sec-mc01-2010 Joint-ic-cda-sec-mc01-2010
Joint-ic-cda-sec-mc01-2010 jo bitonio
 
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Aamer Rahim
 
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Aamer Rahim
 
Proceedings%20of%20the%20chmn,%20 Irda
Proceedings%20of%20the%20chmn,%20 IrdaProceedings%20of%20the%20chmn,%20 Irda
Proceedings%20of%20the%20chmn,%20 IrdaPankaj Mathpal
 
Role of insurance company in Bangladesh Economy.
Role of insurance company in Bangladesh Economy.Role of insurance company in Bangladesh Economy.
Role of insurance company in Bangladesh Economy.Md.Al-amin Hossain Misbah
 
Presentation on life insurance
Presentation on life insurancePresentation on life insurance
Presentation on life insuranceAli Iqbal
 
A project report_on_consumer_perception towards life insurance
A project report_on_consumer_perception towards life insuranceA project report_on_consumer_perception towards life insurance
A project report_on_consumer_perception towards life insuranceSANJAYBT
 
SIMS-SPECIAL FEATURES OF INSURANCE CONTRACT
SIMS-SPECIAL FEATURES OF INSURANCE CONTRACTSIMS-SPECIAL FEATURES OF INSURANCE CONTRACT
SIMS-SPECIAL FEATURES OF INSURANCE CONTRACTSIMS
 
Historical Development of Insurance im Ethiopia
Historical Development of Insurance im EthiopiaHistorical Development of Insurance im Ethiopia
Historical Development of Insurance im Ethiopiagetabelete
 
Irda rules in insurance sector and capital structure of insurance companies.
Irda rules in insurance sector and capital structure of insurance companies.Irda rules in insurance sector and capital structure of insurance companies.
Irda rules in insurance sector and capital structure of insurance companies.Vishnu NK
 

Ähnlich wie Ulip Ban: Sebi Order (20)

Insurance as a investment tool @ icici bank project report mba finance
Insurance as a investment tool @ icici bank project report mba financeInsurance as a investment tool @ icici bank project report mba finance
Insurance as a investment tool @ icici bank project report mba finance
 
A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...
A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...
A comparative study on ‘ulip’ polices offerd by icici and comparison to hdfc ...
 
Stress management project report @ icici bank
Stress management project report @ icici bank Stress management project report @ icici bank
Stress management project report @ icici bank
 
Legal Framework of Takaful
Legal Framework of TakafulLegal Framework of Takaful
Legal Framework of Takaful
 
Emerging dimensions of insurance sector and analytics
Emerging dimensions of insurance sector  and analyticsEmerging dimensions of insurance sector  and analytics
Emerging dimensions of insurance sector and analytics
 
Securitisation
SecuritisationSecuritisation
Securitisation
 
Securitisation
SecuritisationSecuritisation
Securitisation
 
Judgement against SBI Life
Judgement against SBI LifeJudgement against SBI Life
Judgement against SBI Life
 
Joint-ic-cda-sec-mc01-2010
Joint-ic-cda-sec-mc01-2010 Joint-ic-cda-sec-mc01-2010
Joint-ic-cda-sec-mc01-2010
 
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
 
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...
 
Proceedings%20of%20the%20chmn,%20 Irda
Proceedings%20of%20the%20chmn,%20 IrdaProceedings%20of%20the%20chmn,%20 Irda
Proceedings%20of%20the%20chmn,%20 Irda
 
Role of insurance company in Bangladesh Economy.
Role of insurance company in Bangladesh Economy.Role of insurance company in Bangladesh Economy.
Role of insurance company in Bangladesh Economy.
 
Chapter 7
Chapter 7Chapter 7
Chapter 7
 
UNIT-2.docx
UNIT-2.docxUNIT-2.docx
UNIT-2.docx
 
Presentation on life insurance
Presentation on life insurancePresentation on life insurance
Presentation on life insurance
 
A project report_on_consumer_perception towards life insurance
A project report_on_consumer_perception towards life insuranceA project report_on_consumer_perception towards life insurance
A project report_on_consumer_perception towards life insurance
 
SIMS-SPECIAL FEATURES OF INSURANCE CONTRACT
SIMS-SPECIAL FEATURES OF INSURANCE CONTRACTSIMS-SPECIAL FEATURES OF INSURANCE CONTRACT
SIMS-SPECIAL FEATURES OF INSURANCE CONTRACT
 
Historical Development of Insurance im Ethiopia
Historical Development of Insurance im EthiopiaHistorical Development of Insurance im Ethiopia
Historical Development of Insurance im Ethiopia
 
Irda rules in insurance sector and capital structure of insurance companies.
Irda rules in insurance sector and capital structure of insurance companies.Irda rules in insurance sector and capital structure of insurance companies.
Irda rules in insurance sector and capital structure of insurance companies.
 

Mehr von The Financial Literates

Mehr von The Financial Literates (8)

ICICI Prudential India opportunities fund brochure
ICICI Prudential India opportunities fund brochureICICI Prudential India opportunities fund brochure
ICICI Prudential India opportunities fund brochure
 
Financial planning for NRI Non Resident Indians
Financial planning for NRI Non Resident IndiansFinancial planning for NRI Non Resident Indians
Financial planning for NRI Non Resident Indians
 
Sbi gold fund presentation booklet - think before you invest
Sbi gold fund presentation booklet - think before you investSbi gold fund presentation booklet - think before you invest
Sbi gold fund presentation booklet - think before you invest
 
Key features of budget 2011 2012
Key features of budget 2011 2012Key features of budget 2011 2012
Key features of budget 2011 2012
 
Mutual Fund Sip
Mutual Fund SipMutual Fund Sip
Mutual Fund Sip
 
Systematic Investment Plan
Systematic Investment PlanSystematic Investment Plan
Systematic Investment Plan
 
The Financial Literates Journal(Jan 2010)
The Financial Literates Journal(Jan 2010)The Financial Literates Journal(Jan 2010)
The Financial Literates Journal(Jan 2010)
 
Misselling - Met Monthly Income Plan
Misselling - Met Monthly Income PlanMisselling - Met Monthly Income Plan
Misselling - Met Monthly Income Plan
 

Kürzlich hochgeladen

Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfMichael Silva
 
Hungarys economy made by Robert Miklos
Hungarys economy   made by Robert MiklosHungarys economy   made by Robert Miklos
Hungarys economy made by Robert Miklosbeduinpower135
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?Stephen Perrenod
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Commonwealth
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdfAdnet Communications
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESKumarJayaraman3
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Guillaume Ⓥ Sarlat
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.KumarJayaraman3
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation2024.03 Strategic Resources Presentation
2024.03 Strategic Resources PresentationAdnet Communications
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxsonamyadav7097
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.Arifa Saeed
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023SkillCircle
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...Antonis Zairis
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...mwangimwangi222
 

Kürzlich hochgeladen (20)

Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdf
 
Hungarys economy made by Robert Miklos
Hungarys economy   made by Robert MiklosHungarys economy   made by Robert Miklos
Hungarys economy made by Robert Miklos
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
 
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation2024.03 Strategic Resources Presentation
2024.03 Strategic Resources Presentation
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptx
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 
Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
 

Ulip Ban: Sebi Order

  • 1. WTM/ PS /IMD/06/APR/2010 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER DIRECTIONS UNDER SECTIONS 11 and 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH SECTION 12(1B) THEREOF. 1. It has been noticed that the following entities have launched several Unit Linked Insurance Products (ULIPs) :- a. Aegon Religare Life Insurance Company Limited b. Aviva Life Insurance Company India Limited c. Bajaj Allianz Life Insurance Company Limited d. Bharti AXA Life Insurance Company Limited e. Birla Sun Life Insurance Company Limited f. HDFC Standard Life Insurance Company Limited g. ICICI Prudential Life Insurance Company Limited h. ING Vyasa Life Insurance Company Limited i. Kotak Mahindra Old Mutual Life Insurance Limited j. Max New York Life Insurance Co. Limited k. Metlife India Insurance Company Limited l. Reliance Life Insurance Company Limited m. SBI Life Insurance Company Limited n. TATA AIG Life Insurance Company Limited 2. Since, the ULIPs launched by the abovesaid entities were prima facie found to be akin to the mutual fund schemes and were launched without obtaining registration from the Securities and Exchange Board of India (hereinafter referred to as “SEBI”) 1
  • 2. under the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “the SEBI Act”) and the regulations made thereunder, notices were issued to these entities on January 15, 2010 (except in case of HDFC Standard Life Insurance Company Limited where the notice was issued on December 14, 2009). SEBI had sought replies from the said entities as to how the ULIPs were launched without obtaining the requisite certificate of registration from SEBI and why appropriate action should not be taken against them under the provisions of the SEBI Act. 3. The entities replied to the aforementioned notices, inter alia, stating that: a. sub-section (2) and (3) of section 11AA of the SEBI Act provide for conditions for any scheme or arrangement to be classified as collective investment schemes and exceptions to the sub-section (2) of section 11AA of the SEBI Act, 1992 respectively. b. section 11AA (3) excludes contracts of insurance under the Insurance Act, 1938 from the purview of collective investment schemes. c. ULIP is a life insurance product and not covered under the definition of “securities” under the Securities Contracts (Regulation) Act, 1956. d. the predominant feature of a ULIP is insurance cover which is dependent on human life and the mere existence of an additional investment feature cannot convert a ULIP into a mutual fund. e. ULIPs have a mandatory insurance cover which forms a vital and inseparable part of every ULIP. f. unlike mutual fund schemes, the linked products are interlinked with the life of the policy holder. g. under a ULIP units are only notionally allocated and not physically issued and the units are created for the purpose of determining the benefits payable under the policy and are not owned by the policyholder. h. under a ULIP only the risk on the investment portion lies with the policyholder while the risk on the life insurance portion vests with the insurer. i. mutual fund units can be transferred or traded freely whereas the rights and benefits under ULIPs are transferable or assignable only for limited purpose. 2
  • 3. j. Unlike a mutual fund, a ULIP is not established in the form of a trust. The fund is held by the insurance company itself as required under the Insurance Act. Ancillary features such as fund management, fund management charges etc., are alone not sufficient to convert a life insurance product into a mutual fund scheme. k. A ULIP is an insurance contract falling within the ambit of life insurance business. “Life Insurance business” is defined under Section 2(11) of the Insurance Act, 1938 inter alia to mean the ‘business of effecting contracts of insurance upon human life’ or ‘the happening of any contingency dependent on human life’. The said definition indicates that the policy is dependent on the happening or the non-happening of an event linked to human life. l. ULIPs fall under the definition of Life Insurance products. Unit Linked Life Insurance Business is defined in IRDA (Investment) Regulations, 2000. Regulation 3(3) states “every insurer shall invest and at all times keep invested his segregated fund of units linked life insurance business as per pattern of investment offered to and approved by the policy holders….” m. “Linked business” is defined in IRDA (Registration of Companies) Regulations, 2000 which means life insurance contracts or health insurance contracts under which benefits are wholly or partly to be determined by reference to the underlying assets or any approved index. n. the product was launched after following appropriate procedures and obtaining unique identification number from IRDA, which is the regulator in case of life insurance products. Thus, there was no need to obtain requisite certificate of registration from SEBI. 4. Before considering the issues involved in the matter, I refer to the relevant provision of the SEBI Act. Section 12(1B) of the SEBI Act provides as under: “No person shall sponsor or cause to be sponsored or carry on or caused to be carried on any venture capital funds or collective investment schemes including mutual funds, unless he obtains a certificate of registration from the Board in accordance with the regulations.” 3
  • 4. 5. I have carefully considered the replies of each of the entities, product brochures of various ULIPs offered by them and the relevant material available on record. Since the subject matter in the notices issued to the entities is identical and their replies are substantially similar, I proceed to deal with issues involved in the matter by way of a common order. Some of the entities have also sought an opportunity of personal hearing. I note that each entity has been served with separate notices and each of them has availed of the opportunity of making its written submissions. Therefore, under facts and circumstances of the case, I do not consider necessary to give an opportunity of personal hearing to the entities in the matter. 6. The question that arises for my consideration is whether ULIPs offered by the said entities are a combination of investment and insurance and if so whether the investment components are in the nature of mutual funds which can only be offered/launched after obtaining registration from SEBI under section 12(1B) of the SEBI Act? 7. From the examination of the product documents of such ULIPs, it is noted that in addition to the insurance component, the ULIPs also have inter alia the following characteristics – a. the product is unit linked and money is raised from public through sale of units to them. b. the investment risk in chosen investment portfolio is borne by investors. c. upon untimely death before the expiration date of the policy the policy holder will be paid either the NAV (Unitized Fund Value) or the sum assured whichever is higher. d. upon survival at the maturity of the policy, the policy holder will be paid the NAV (Unitized Fund value) of the investments. e. premium will be used to allocate units in the fund chosen by the investor. f. the product has characteristics such as fund management, fund management charges, switch and partial withdrawal options. 4
  • 5. 8. It is observed that the various ULIPs launched/offered by these entities offer investment options with varying degrees of exposure to equity and debt. It is also noted that in their product brochure for ULIPs, the entities have under the heading “risks of investments”, inter alia, disclosed and declared that: a. unit linked life insurance products are different from traditional insurance products and are subject to risk factors. b. the premium paid in unit linked life insurance policies are subject to investment risks associated with capital markets and the unit price of the units may go up or down based on the performance of the fund and factors influencing the capital market and the insured/policyholder is responsible for his/her decisions. 9. From the above, I find that the attributes of the ULIPs launched/offered by these entities are different from the traditional insurance products and they are a combination of insurance and investment. The attributes of the investment component of ULIPs launched by these entities are akin to the characteristics of mutual funds which issue units to the investors and provide exit at net asset value of the underlying portfolio. The investment component of ULIPs is subject to investment risks associated with securities markets which are entirely borne by the investors. I also find that the entities by their own admission have stated that there are two components of ULIPs - an insurance component where the risk on the life insurance portion vests with the insurer and the investment component where the risk lies with the investor. This establishes conclusively that ULIPs are a combination product and the investment component need to be registered with and regulated by SEBI. 10. Now I proceed to deal with the specific contentions raised by the aforesaid entities. 11. Some of the entities have pleaded that the regulations issued by IRDA are special laws for ULIPs and SEBI cannot apply the general laws applicable to tradeable securities such as collective investment schemes or mutual funds to ULIPs. In this regard, I find that in terms of section 11(1) of the SEBI Act one of the duties of SEBI is to protect the interests of the investors in securities and to promote the development 5
  • 6. of, and to regulate, the securities market by such measures as it thinks fit. Section 11(2) of the SEBI Act enumerates certain illustrative measures which can be taken by SEBI without prejudice to the provision of sub-section (1). One such measure is registering and regulating the working of collective investment schemes including mutual funds. To carry out the purposes of sections 11 and 12(1B), SEBI has framed various regulations including the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999. The SEBI Act and the regulations made thereunder are also special laws made/laid before the Parliament and any investment product or investment contract having any characteristic of securities or exposing investors to securities market risks is under the jurisdiction of SEBI under the SEBI Act. 12. It is also contended that a mutual fund is a fund established in the form of a trust for raising money through the sale of units through the public and established under one or more schemes for investing in securities. I find that in terms of section 12(1B) of the SEBI Act “no person” can sponsor or cause to be sponsored a collective investment scheme including a mutual fund unless he has been registered with SEBI under the SEBI Act. I note that the emphasis is on the prior registration with SEBI under the SEBI Act, notwithstanding who that person is. Therefore, an entity which is not established in the form of a trust cannot launch or offer an investment product in the nature of mutual fund without being registered with SEBI. The structure of the entity is immaterial for compliance of section 12(1B) of the SEBI Act. For seeking registration such person has to establish a trust for launching mutual fund schemes. Thus, the “trust” structure is not a condition for compliance of section 12(1B) of the SEBI Act though it is a requirement for getting registered as a mutual fund. 13. It is also contended by the said entities that ULIPs are predominantly life insurance products having an investment component. In my opinion, if in a combination product there is an investment component, in any proportion, exposing investors to risks of 6
  • 7. securities market products, it can be issued only after obtaining registration from SEBI and compliance of the applicable laws with respect to such component. 14. The entities have contended that the predominant feature of a ULIP is insurance cover which is dependent on human life and the mere existence of an additional investment feature cannot convert a ULIP into a mutual fund. Further, it has been said that ULIPs have a mandatory insurance cover which forms a vital and inseparable part of every ULIP. In this regard I note from one of the products offered by one of the entities that for a sum assured of Rs. 15,00,000/- an annual premium of Rs. 1,50,000/- is collected for 10 years. The premium allocated for insurance out of this is Rs. 7500/- in the first year and Rs. 3000/- in subsequent years. (The annual premium for a term plan for 10 years for an identical sum assured for an identical life assured by the same company is Rs. 3,342/-) Here, the insurance component is 2% of the premium paid. The products offered by other entities also follow a broadly similar pattern. Thus, the argument that insurance is both predominant and inseparable in a ULIP fails. 15. Some of the entities have contended that even if the ULIP is construed to be a mutual fund the existing mutual fund regulations lay down terms and conditions which cannot be complied with by life insurance companies while issuing ULIPs. Further, if SEBI can regulate ULIPs, the SEBI Regulations as they currently stand cannot be applied to the unique features of ULIP and since SEBI has not provided any guidance for insurance companies, they cannot be penalized for any non compliance. I find it unacceptable and untenable that having admitted ULIP as combination product with an investment component, the issuers expect that they be allowed not to comply with the existing Mutual Fund Regulations. The substance and spirit of SEBI Act and regulations framed thereunder makes an over arching emphasis on investor protection. It is imperative and incumbent upon every entity to comply with the regulations. In my view, such products attract the SEBI Regulations and the entities must seek registration from SEBI for launching such products. The existing regulations have detailed scheme and procedure for registration and regulation of 7
  • 8. mutual funds. Framing of special regulations for ULIPs under section 12 (1B) is not a pre-requisite for compliance of said section. 16. It is noted that in some of its ULIPs, the entities offer the investors the guarantee to encash the units at maturity at the highest unit price achieved by the fund over the term of the policy. This reinforces that the ULIPs launched/offered by these entities are a combination of insurance and investment. From the examination of the product documents of the ULIPs and the investment options offered therein by the entities it is noted that: a. the contributions or payments made by the investor are pooled; b. the contributions or payments are made to such ULIPs by the investor with a view to receive profits, income; c. the investment made by the investor in the ULIPs is managed on behalf of the investor; d. the investor do not have day to day control over the management and operation of the ULIPs. The aforementioned attributes are those of a collective investment scheme and also of the mutual funds. 17. It is contended that section 11AA (3) of the SEBI Act excludes ‘contracts of insurance’ from the purview of a collective investment scheme as enumerated under section 11AA (2) of the SEBI Act. From the perusal of the product brochures of the ULIPs it is noted that the said products are combination of investment and insurance. The investor chooses between the options and decides as to how much be allocated toward buying insurance and how much be allocated towards investment. The ULIPs have a component of investment product and carry with themselves securities market risk which is borne by the investors. I find that the ULIPs launched/offered by the said entities are not purely in the category of “contracts of insurance” but have components of investment products. 8
  • 9. 18. It is also contended that the contracts of insurance are exempt from the purview of a collective investment scheme under section 11AA (3) of the SEBI Act. Here, it is necessary to clearly understand the nature of collective investment schemes as referred to in the section 11AA of SEBI Act. Collective investment schemes have characteristics defined in Section 11AA (2); viz. pooled investments, investors not participating in day to day control of investments etc. However, in terms of Section 11AA (3), collective investment schemes exclude all types of schemes/arrangements which have financial bearing. viz. deposits taken by non-banking financial companies, contracts of insurance, pension schemes and also mutual funds. Thus the argument that Section 11AA (3) exempts insurance contracts from the purview of collective investment schemes does not in any way exempt ULIPs which are a combination of insurance and investment from Mutual Fund Regulations. 19. The entities have contended that ULIPs are an insurance contract falling within the ambit of life insurance business and have quoted Section 2(11) of Insurance Act in this regard. It has been established in the preceding paragraphs that ULIPs are a combination of insurance and investment. Therefore, in my opinion, they must be regulated under relevant/applicable Acts and Regulations. The investment component should be registered with and regulated by SEBI. 20. It has been contended that ULIPs are a life insurance product and life insurance products are not covered under Securities Contracts (Regulations) Act, 1956. Units of ULIPS have the characteristics of units of mutual funds. Units of mutual funds are “securities” as defined under Section 2 (h) of Securities Contracts (Regulations) Act, 1956. Merely because they are named as units of ULIPs, such units cannot be ousted from the ambit of definition of “securities”. 21. The entities have also contended that units issued under ULIPs are not freely transferable or have transferability for limited purpose, therefore, they are not units of mutual funds. I find that not all the units of mutual funds are transferable, e.g., in the case of open ended schemes of mutual fund the investor subscribes to and redeems 9
  • 10. from the mutual fund directly. The units of an open ended mutual fund scheme are, therefore, not transferable. Further, not in all cases are the units of mutual fund schemes issued physically. I note that it is common among mutual funds to issue statements of accounts. Therefore, the contentions in these regards are misconceived. 22. I find that the attributes of ULIPs launched/offered by the aforesaid entities have components of mutual fund schemes. As discussed above, in spirit and substance, the ULIPs have characteristics of mutual fund schemes and the arguments forwarded by the entities have no merit. It is, therefore, necessary from the point of view of protecting the interest of investors that such products should be offered/launched after obtaining requisite certificate of registration from SEBI under the SEBI Act. 23. The entities have contended that their policies were launched after following appropriate procedures and obtaining requisite permission from IRDA, which is the regulator in case of life insurance products. The approval/registration from one regulatory authority does not exempt the entity from complying with other applicable laws administered by relevant regulators. 24. In view of the above, I conclude that ULIPs offered by the said entities are a combination of investment and insurance and, therefore, the investment components are in the nature of mutual funds which can only be offered/launched after obtaining registration from SEBI under section 12(1B) of the SEBI Act. 25. However, the said entities have not obtained any certificate of registration from SEBI though the ULIPs launched by them had an investment component in the nature of mutual funds, as mandated by section 12(1B) of the SEBI Act. It is, therefore, necessary to restrain the entities mentioned in para 1 of this order from raising further monies/subscription, new and/or additional, from the investors for any product (including ULIPs) having an investment component in the nature of mutual funds till they obtain registration from SEBI. 10
  • 11. 26. Accordingly, in exercise of the powers conferred upon me by virtue of section 19 of the SEBI Act read with sections 11, 11B and 12(1B) thereof, I hereby direct the entities mentioned in para 1 of this order not to issue 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. This order is without prejudice to any action that might be taken by SEBI in respect of offer documents or advertisements issued by these entities for products (including ULIPs) having an investment component in the nature of mutual funds launched so far. 27. This order will not affect soliciting money/subscription from public with respect to any pure contract of insurance or the insurance component of a combination product. 28. This order shall come into force with immediate effect. DATE: April 9, 2010 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA 11