SEBI and FEMA ActANOOP K SRIVASTAVAANURAG MANGAINHARDIK GANDHIRONAK PANCHALSACHIN MOGHEVINAYAK 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 FEMAThe 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of FEMAForeign Exchange Management Act (FEMA) replaced Foreign Exchange Regulation Act of 1973 (FERA) in India was repealed on 1 June, 2000.Exchange Control Act, during the second world war Foreign Exchange Regulation Act in 1947.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 ECONOMYIndian 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 InformationHow 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 TRANSACTIONSCAPITAL 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 RESPONSIBILITYProvisions under FEMA ActAdministration of FEMA ProvisionsAuthorized PersonResponsibilities of Authorized Person

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FEMA 1999 ENFORCEMENT DIRECTORATEEstablished 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 FUNCTIONSORGANISATIONAL 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 FUNCTIONSTo 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 PENALTIESPenalty 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 contraventionConfiscation 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 1999ALLIED 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 ActControls 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 CONVERTIBILITYWhat is CACPrerequisite of CACEvolution of CAC in India Economic ScenarioReasons for Introduction of CAC in IndiaBenefits and Drawbacks of CAC

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CASE SYUDY 1Hutchison EssorIndian CompanyVodafone(Briton)A Foreign companyHTIL(Whampoa group of Li-Ka Shing. Hong KongA foreign company67%Takes overAsim Ghosh-12%A.Singh and other companies(Minority)

Essor group

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Case Study Contd..ED Has Issued 715 notices for violation of FEMA in last three yearsAppolo HospitalsCase Against Vijay MallyaReliance Industries LimitedYum Restaurants

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SEBISECURITIES EXCHANGE BOARD OF INDIA

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HISTORY OF STOCK MARKET & SEBIFirst Stock Exchange made in 1602 and East India Company was the first company to purchase shares.Bombay Stock Exchange was established in 1875Earlier stock exchanges were dealing in commodities market

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PRIOR TO SEBISecurities Contracts (Regulation) Act 1956 was formed to control stock markets and securities in IndiaIT 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 PICTUREThe 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 SEBIObjectives 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 MarketChecks 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 STUDIESSEBI 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 STUDIESSEBI 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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