SEBI and FEMA Act

ANOOP K SRIVASTAVA
ANURAG MANGAIN
HARDIK GANDHI
RONAK PANCHAL
SACHIN MOGHE
VINAYAK DAVE

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FOREIGN EXCHANGE
MANAGEMENT ACT 1999
INTRODUCTION
HISTORY
GENERAL INFORMATION
PROVISIONS AND OPERATIONAL RESPONSIBILITY
ENFORCEMENT DIRECTORATE
ALLIED ACTS
MAIN OBJECTIVES
CASE STUDIES

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Introduction to FEMA

The objective of the Act is to

consolidate and amend the law relating
to foreign exchange with the objective
of facilitating external trade and
payments and for promoting the orderly
development and maintenance of foreign
exchange market in India.

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History of FEMA

Foreign Exchange Management Act (FEMA) replaced

Foreign Exchange Regulation Act of 1973 (FERA) in
India was repealed on 1 June, 2000.

Exchange Control Act, during the

second world war

Foreign Exchange Regulation Act in 1947.

Why FERA was replaced by FEMA?
Foreign Exchange Reserve Position
Rules and Regulations for Fera Under FERA,

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Negative impact of FERA

HOW HAWALA TRADING EFFECTED INDIAN

ECONOMY

Indian rupee rates Vs. U.S. dollar were as under.

Year 1981Rs. 8 per dollar.

Year 1991Rs. 18 per dollar.

Year 1999Rs. 43 per dollar.

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General Information
How different is FEMA from FERA?

Objective
Transactions in Capital Account and Current Account.
Civil/Criminal Prosecution
Who is resident in India ?
Credit Cards, Debit cards etc.

EXTENSION/APPLICABILITY OF THE ACT

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CLASSIFICATION OF
TRANSACTIONS

CAPITAL ACCOUNT TRANSACTIONS:

Transactions that alter the domestic assets and
liabilities of a person resident in India or a person
resident outside India in relation to his country.
CURRENT ACCOUNT TRANSACTIONS:
Transactions which do not fall under the ambit of
capital account transactions are considered as current
account transactions.

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FEMA PROVISIONS &

OPERATIONAL
RESPONSIBILITY

Provisions under FEMA Act

Administration of FEMA Provisions
Authorized Person
Responsibilities of Authorized Person

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FEMA 1999
ENFORCEMENT DIRECTORATE

Established by Central Govt to investigate due

adherence to the provisions of the Act by market
participants.
Concerned with enforcement of the provisions of the
Act to prevent leakage of foreign exchange occurring
through various malpractices.
Directorate of Enforcement is responsible for
detection of cases relating to violation and
performance of adjudicatory functions to curb
malpractices.
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ENFORCEMENT DIRECTORATE
ORG SET UP AND FUNCTIONS
ORGANISATIONAL SET UP :

Head Quartered at New Delhi.

7 Zonal Offices headed by deputy directors, 1 each in 4 metros
& Jalandhar, Ahmedabad & Bangalore.
9 sub zonal offices headed by Assistant Directors at Agra,
Srinagar, Jaipur, Varanasi, Trivandrum, Calicut, Hyderabad,
Guwahati & Goa.
1 Unit at Madurai headed by Chief Enforcement Officer.
3 Special Directors of Enforcement and 1 Additional Director
of Enforcement.
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ENFORCEMENT DIRECTORATE
FUNCTIONS

To collect and develop intelligence relating to

violation of provisions of FEMA.
To conduct searches of suspected persons,
conveyances and premises for seizing incriminating
materials.
To enquire into and investigate suspected violations
or provisions of FEMA.
To adjudicate cases of violations of FEMA for
levying penalties and also for confiscating the
amounts involved in contraventions.
To realise penalties in departmental adjudication.
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CONTRAVENTION AND
PENALTIES

Penalty of upto 3 times of the sum involved in each

contravention where such amount is quantifiable.
Penalty of upto Rs 2 lakhs where the amount is not
quantifiable.
In case of continuing contravention, further penalty of Rs
5,000.00 for every day after the first day of contravention
Confiscation of currency, security or any other money or
property in respect of which the contravention has taken place.
Civil imprisonment for failure to make full payment of the
penalty imposed within 90 days from the notice of payment.

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FEMA 1999
ALLIED ACTS

COFEPOSA Conservation of Foreign

Exchange & Prevention of Smuggling
Activities Act, 1974.
SAFEMA The Smuggling & Foreign
Exchange Manipulation (Forfeiture of
Property) Act, 1976.
Foreign Contribution (Regulation) Act, 1976.

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Main Objectives of FEMA Act

Controls dealings in foreign exchange

Restrains any person resident in India from
dealing in foreign exchange
Deals with capital account transactions.
Deals with export of goods and services.
Casts the responsibility on the persons
resident
Pertains to the establishment of Directorate
of Enforcement and the empowers it to
control voilation of the act
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CAPITAL ACCOUNT
CONVERTIBILITY

What is CAC
Prerequisite of CAC
Evolution of CAC in India Economic Scenario
Reasons for Introduction of CAC in India
Benefits and Drawbacks of CAC

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CASE SYUDY 1

Vodafone(Briton)
A Foreign company

Takes over

HTIL(Whampoa group
of Li-Ka Shing.
Hong Kong
A foreign company

67%
Essor group
Hutchison Essor
Indian Company

Asim Ghosh-12%
A.Singh and other companies
(Minority)

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Case Study Contd..

ED Has Issued 715 notices for

violation of FEMA in last three years
Appolo Hospitals
Case Against Vijay Mallya
Reliance Industries Limited
Yum Restaurants

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SEBI
SECURITIES EXCHANGE BOARD OF INDIA

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HISTORY OF STOCK MARKET &

SEBI
First Stock Exchange made in 1602
and East India Company was the
first company to purchase shares.
Bombay Stock Exchange was
established in 1875
Earlier stock exchanges were
dealing in commodities market

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PRIOR TO SEBI

Securities Contracts (Regulation) Act 1956 was

formed to control stock markets and securities in
India
IT was an Act which empowers Central Govt to
recognize stock exchanges and has total control over
it. Exchanges have to submit periodical returns or
govt may call for direct enquiries

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HOW SEBI CAME IN TO

PICTURE

The World Bank and the International

Monetary Fund (IMF) have introduced a
benchmark i.e., Financial Services Assessment
Programme (FSAP)
The mission of SEBI is to make India as one
of the best securities market of the world
and SEBI as one of the most respected
regulator in the world.

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Objectives and Functions of SEBI

Objectives of SEBI:
It tries to develop the securities market.
Promotes Investors Interest.
Makes rules and regulations for the securities market.
Functions Of SEBI:
Regulates Capital Market
Checks Trading of securities.
Checks the malpractices in securities market.
It enhances investor's knowledge on market by providing
education.
It regulates the stockbrokers and sub-brokers.
To promote Research and Investigation

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CASE STUDIES

SEBI has directed Dipak Patel (U.S.A Passport

No.209189753 ), Portfolio Manager of M/s
Passport India Investment (Mauritius) Ltd,
Kanaiyalal Baldev Patel (PAN
AEWPP1442H ), Anandkumar Baldevbhai
Patel (PAN AACFB8866B ) and Bhoomi
Industries (PAN AACFB8866B) not to buy,
sell or deal in any securities, directly or
indirectly till further directions in this regard.
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CASE STUDIES

SEBI has directed Dipak Patel (U.S.A Passport

No.209189753 ), Portfolio Manager of M/s
Passport India Investment (Mauritius) Ltd,
Kanaiyalal Baldev Patel (PAN
AEWPP1442H ), Anandkumar Baldevbhai
Patel (PAN AACFB8866B ) and Bhoomi
Industries (PAN AACFB8866B) not to buy,
sell or deal in any securities, directly or
indirectly till further directions in this regard.
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