Securities and Insurance
The security market is a platform for buying and selling financial instruments such as stocks, bonds and other securities. It plays a vital role in the economy by enabling individuals, companies and governments to raise capital and investors to invest their funds in various financial instruments.
The security market must be adequately regulated to ensure its orderly functioning and protect investors’ interests. Controlling the security market protects investors by ensuring that securities are traded fairly, transparently and efficiently and by reducing the risk of fraud and market manipulation. It also helps maintain the market’s integrity by preventing insider trading and other illegal activities that could undermine investor confidence. Regulation can also promote capital formation by giving issuers access to capital and enabling investors to access various financial instruments.
Furthermore, it fosters competition by ensuring equal access to information and resources and curtailing anti-competitive behaviour. In India, securities laws and regulations are established to protect investors and promote the orderly functioning of the security market. The primary regulator of the market is the Securities and Exchange Board of India (SEBI). It is empowered by the SEBI Act, the Securities Contract (Regulation) Act (SCRA), the Companies Act, the Depositories Act and the Prevention of Money Laundering Act (PMLA). These laws regulate the security market, including the prohibition of insider trading and the rule of stock exchanges and brokers. Additionally, SEBI has issued several regulations and guidelines for the market, such as those on insider trading, market manipulation and disclosure of material information by companies.
The Insurance Regulatory and Development Authority of India (IRDAI) is the chief controller. Still, other authorities look after the specific states of affairs in the insurance industry. These include the Insurance Association of India, the Tariff Advisory Committee, the Insurance Act 1938, the Insurance Rules 1939, the Redressal of Public Grievances Rules 1998 and the Amendment of Insurance Act 2015.
The Insurance Association of India guides insurers towards good practices by setting up a general code of conduct for the business. The Tariff Advisory Committee monitors interest rates, benefits, duration and coverage, and terms and conditions provided by the insurance providers. The Ombudsman is appointed to handle grievances and complaints of policyholders, settle insurance claims and check for fair codes of conduct amongst insurers.
The Insurance Act of 1938 provides the legal framework and guidelines for insurers, while the Insurance Rules of 1939 regulate insurance companies’ committees, intermediaries and processes. The Redressal of Public Grievances Rules, 1998, are meant to address the complaints of existing policyholders against the insurance providers. Finally, the Amendment of the Insurance Act 2015 increased the cap on foreign investments from 26% to 49%. It enabled the offering of alternative types of capital instruments. It also allows foreign reinsurers to operate out of self-owned branch offices. It introduces health insurance as an individual product. These laws and regulations of insurance ensure that policyholders are not taken advantage of or exposed to any malpractices by insurance providers. They also prevent any unlawful activities and malpractices.
Our firm is committed to providing high-quality legal services to our clients in the securities and insurance industries. If you require legal assistance in these areas, please do not hesitate to contact us to schedule a consultation.