SEBI and FEMA Act

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

SIMSR MFM Ist SEM 1

 FOREIGN EXCHANGE
MANAGEMENT ACT 1999
 INTRODUCTION
 HISTORY
 GENERAL INFORMATION

 PROVISIONS AND OPERATIONAL RESPONSIBILITY

 ENFORCEMENT DIRECTORATE

 ALLIED ACTS

 MAIN OBJECTIVES

 CASE STUDIES

SIMSR MFM Ist SEM 2

 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.

SIMSR MFM Ist SEM 3

 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India was repealed on 1 June, 2000.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,

SIMSR MFM Ist SEM 4

 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.

SIMSR MFM Ist SEM 5

 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

SIMSR MFM Ist SEM 6

 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.

SIMSR MFM Ist SEM 7

 FEMA PROVISIONS &
OPERATIONAL
RESPONSIBILITY
 Provisions under FEMA Act
 Administration of FEMA Provisions
 Authorized Person
 Responsibilities of Authorized Person

SIMSR MFM Ist SEM 8

 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.

SIMSR MFM Ist SEM 9

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.

SIMSR MFM Ist SEM 10

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.

SIMSR MFM Ist SEM 11

 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.

SIMSR MFM Ist SEM 12

 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.

SIMSR MFM Ist SEM 13

 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
SIMSR MFM Ist SEM 14
 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

SIMSR MFM Ist SEM 15

 CASE SYUDY 1

HTIL(Whampoa group
Takes over
Vodafone(Briton) of Li-Ka Shing.
A Foreign company Hong Kong
A foreign company

67%
Essor group
Hutchison
Asim Ghosh-12%
Essor A.Singh and other companies
Indian SIMSR MFM Ist SEM
(Minority) 16
Company
 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

SIMSR MFM Ist SEM 17

 SEBI
 SECURITIES EXCHANGE BOARD OF INDIA

SIMSR MFM Ist SEM 18

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

SIMSR MFM Ist SEM 19
 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

SIMSR MFM Ist SEM 20

 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.

SIMSR MFM Ist SEM 21

 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

SIMSR MFM Ist SEM 22

 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.
SIMSR MFM Ist SEM 23
 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.
SIMSR MFM Ist SEM 24