New Delhi: A prominent investor group has come out in support of the Securities and Exchange Board of India (Sebi) in its tussle with insurance regulator Insurance Regulatory and Development Authority (Irda) over the regulation of insurance products that also double up as investment ones.

The Delhi-based Midas Touch Investors Association, which has around 200 members and is registered with the ministry of corporate affairs and Sebi, wrote a letter to finance secretary Ashok Chawla on Thursday, urging the government to allow Sebi to jointly regulate unit-linked insurance plans (Ulips) with Irda.

“In our view, Sebi’s contention in their order dated 9 April 2010 that ‘Ulips are a combination product and the investment component needs to be registered with and regulated by Sebi is in consonance with the spirit and letter of the Sebi Act, 1992.’ Hence, it is not only responsible for regulating the same, but it is obligatory upon it to carry out the mandate given by the legislature. Insurance companies and Irda’s stand that a Ulip is an insurance contract falling within the ambit of life insurance business and consequently to be regulated exclusively by Irda is erroneous,” the letter said.

The letter repeats Sebi’s contention that Ulips are investment products packaged as insurance products: “The cost of life insurance cover constitutes a very small part (from 1-5%) of the annual premium and the balance is deployed in units and defraying charges. A comparison of charges levied under Ulips and that permissible under Sebi guidelines for mutual funds reveals a huge difference with Ulip charges being confiscatory against far reasonable in mutual funds.”

Virendra Jain, president, Midas Touch Investors Association, said: “Sebi has expertise to regulate the investment market. The insurance market is coming out with products that encroach upon the investment turf and, therefore, it makes sense for Sebi to regulate the investment part. Sebi has been regulating mutual funds and has done a good job of it.”

Midas Touch has been in existence for at least 15 years and played a major role in recovering money for around 200,000 investors when Canstar, a mutual fund scheme of Canara Bank Mutual Fund, defaulted on its promise of giving assured returns. Subsequently, Sebi amended its regulations and introduced safeguards for investors in assured mutual fund schemes by making the fund’s trustees responsible for the same.