Attributing the differences between Sebi and IRDA over administration of ULIPs to regulatory gaps, the Planning Commission today said the establishment of the Financial Stability and Development Council (FSDC) will help in resolving such issues.

Speaking on sidelines of a function, Planning Commission Deputy Chairman Montek Singh Ahluwalia also said that differences between the two warring regulators have not caused any uncertainity in the market.

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As regards the proposed FSDC, Ahluwalia said it would "rework the system to close these (regulatory) gaps".

Finance Minister Pranab Mukherjee in his Budget speech proposed to set up the council to address "inter-regulatory coordination" issues. The government, however, has yet to finalise the structure of the FSDC.

The dispute between Sebi and IRDA relates to who should regulate ULIPs, a hybrid investment instrument which are issued by life insurance companies.

Describing the issue as "complex and legal", Ahluwalia further said, "I think the matter has been resolved... One of the major problems in the financial sector is that different parts of the financial systems have developed in different times, so there are always regulatory gaps."

Following the dispute and conflicting orders by the regulators, the Finance Ministry on Monday brokered a peace by persuading the IRDA and Sebi to seek a legally binding agreement from a court and restore status quo ante, the position that prevailed before the issuance of Sebi order on April 9, 2010.

Sebi in its order had banned 14 life insurance companies, including those belonging to SBI, Tata, ICICI and the Reliance Anil Dhirubhai Ambani Group, from issuing ULIPs. Within 24 hours, IRDA directed the insurers to ignore Sebi's order and continue business, forcing the Finance Ministry to intervene in the matter.

Sebi yesterday came out with a second order on the ULIP issue which said that companies cannot issue any fresh schemes, but can operate schemes launched prior to April 9, 2010.

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