This presentation gives you a detailed insight into the topics- FEMA, SEBI & Competition Act. It has practical & best examples to make the learning easier & interesting.

1. By- Ms Bushra Begum
Asst Professor, MBA
Apollo Institute of Technology, Kanpur.

2.  The first formal law relating to foreign exchange came in the year
1947, this law was called FERA or Foreign Exchange Regulation
Act. It was made for 10 years i.e. from 1947-1957.
 In the year 1957, FERA was made permanent. At that time, Prime
Minister was Pt. Jawaharlal Nehru.
 But FERA, 1947 consists of very strict rules & regulations that did
not promoted exports so a need for amendments was felt.
 So, with some necessary amendments, FERA again came in the
year 1973.
 FERA, 1973 was made applicable in India on 1 January 1974.

3. Explanation with few examples :-
 We all know that in order to become a developed country, we must export
more & import less. But India imports more & exports less. Mainly it
imports petroleum products.
 We also know that Dollar is an internationally accepted currency & our
Indian Rupee is not.
 If one has to travel to foreign, Indian Rupee will not be accepted. He must
have Internationally accepted currency like Dollar, pounds etc. One should
have either their country’s currency or any other internationally accepted
currency.
 So, we must have Internationally accepted currencies in our country for
making various foreign payments. And this foreign currency will come into
our country, if we export more or when people do jobs in foreign they
bring with them the foreign currency.

4.  During independence period, India faced a challenge of increasing the
foreign resources more.
 FERA had very rigid rules & regulations which could not help in increasing
more foreign currency into India.
 So, FERA 1973 came in with certain new changes.
 At that time, a controversy happened with Coca Cola due to certain
regulations of FERA 1973 regarding ownership stakes. Coca Cola stopped
its operations and left India but later everything resolved & Coca Cola came
back to India. So, this was the impact of FERA.
 FERA 1973 also was not successful in bringing the foreign currency to our
country. It was again replaced by FERA, 1993.
 FERA, 1993 was finally replaced with FEMA ( Foreign Exchange
Management Act),1999.

5. FERA
FEMA
1. The objective was to preserve the
foreign currency & ensure that there
is minimum withdrawal of foreign
currency.
2. It had a conservative approach.
3. It focused on how to control foreign
exchange transactions.
4. Violation of rules of FERA was
considered a criminal offence.
5. Person who violated FERA was
without warrant arrested.
6. It had 81 sections.
1. The objective was promotion,
development & maintenance of
foreign exchange market.
2. It had broad approach.
3. It managed the foreign exchange
transactions.
4. Violation of the rules of FEMA is a
civil offence.
5. There is compounding facility ( you
can go to jail or pay the decided
penalty).
6. It had 49 sections which are
divided in 7 chapters.

6. Some Cases Registered under FEMA
:-
1. Baba Ramdev- Regarding some property (Island)
outside India.
2. Shahrukh Khan- Regarding IPL Franchisee
1. Mika- was found carrying foreign currency of
amount more than permissible.

7. All these people had allegations regarding violating
FEMA.

8. RBI
It frames the
regulations of
FEMA.
Directorate
of
Enforcement
Deals with all
the cases relating
to FEMA;
Financial scams;
matters relating
to investigation,
charges &
compounding.
Foreign
Investment
Promotion
Board

9.  Tata Docomo company was a joint venture of Tata (an
Indian Company) & Docomo (a Japanese company).
 Tata had to make some payments to Docomo but RBI did
not allowed Tata to make the payments because it violated
some rule of FEMA.
 The case went to various courts & the company requested
to allow it for payments but RBI did not allowed.
However, the case was later resolved.
 So the example shows the importance of FEMA.

10.  Facilitating external payments.
 Facilitating external trade.
 Promoting orderly development & orderly
maintenance of Foreign Exchange Market in
India.

11. It is applicable in-
Whole of
India
All branches, offices
& agencies outside
India owned or
controlled by a
person resident in
India.
Citizens of India
who are outside
India unless they
are resident of
India.

12.  FEMA is not applicable on a company located outside India. Eg – ABC Ltd is
located in Dubai, on it FEMA is not applicable.
 If the owner of the company is residing in India and controlling his company
located outside India, FEMA will be applicable on it. Eg- Emaar Ltd is in Dubai
and controlled by some person of India so FEMA will be applicable on it.
 If a foreign company whose branch is in India, FEMA will be applicable on it.
Eg- Microsoft Ltd (USA) suppose has branches in India, FEMA will be
applicable on it.
 If a foreign company has its branch office in India, then on this branch FEMA is
applicable. Now if this branch further controls offices outside India, then on
those offices FEMA will be applicable.
Eg- Al Habibi Ltd is Dubai based company & it has its branch in India. This
branch controls three branches in Thailand, Australia & New Zealand. So, FEMA
will be applicable on the branch in India and also be applicable on three branches
in Thailand, Australia & New Zealand.

13.  Competition can be defined as a situation in which all the
sellers or firms are striving for the buyers with their own
business objectives like profits, market sales, market share etc.
 Competition is important for the society because- the
consumers get a wide variety of products & services & the
sellers become more efficient and achieve their objectives.
 Competition can be both fair & unfair. Fair competition like
by providing quality goods & services. Unfair competition like
misleading advertisements.

14.  Earlier since there were less number of firms & businesses and the
governmental rules were also rigid so monopoly situation was created. This
de motivated the other firms & businesses to enter the market.
 Hence , came the MRTP Act in 1969. MRTP stands for Monopolistic
Restrictive Trade Practices Act. The objective of this act was to prohibit
unfair & restrictive trade practices.
 The MRTP Act could not meet the challenges of the changing modern
economy. Then, in 1991 came Liberalization .
 Later MRTP Act 1969 was replaced by COMPETITION ACT, 2002.
 Competition Act was amended on 10th September 2007 by Parliament.

15.  To eliminate the practices having adverse effect on
competition.
 To promote & sustain competition in the market.
 To protect consumers interests.
 To ensure freedom of trade carried on by other
participants in market.

16.  It stands for Securities Exchange Board of India.
 It was established in 1988 but given legal powers in 1992 under the
SEBI Act to regulate the function of security market or stock market.
 It act as a watchdog in security/share market.
 Its main purpose is to check on mal practices (fraud) & to protect
the interest of investors.
 It also works on developing board of conduct for the intermediaries
( brokers-how they will work, minimum qualification etc.)

17. 1. Protective functions-
a) Check price rigging ( it is illegal, it happens when group of people or
businesses agree to set the price for something)
b) Educate investors
2. Developmental functions
a) Promotes training to the brokers.
b) Adaptable flexible approach ( like you can now buy/sell share sitting at
home by your phone)
c) Made underwriting optional ( Underwriting is the process when people
are appointed to buy the agreed number of shares/debentures of a
company for a certain consideration, those people are called underwriters.

18. 3. Regulatory functions-
a) Frames rules & regulations (code of conduct).
b) Conduct inquiries & audit.
An example of Price Rigging ( already defined in previous slide)
People saw that “XYZ’ company is catching attention on the stock market. It is
becoming strong because people are buying its shares. So others also
followed the footstep and purchased the shares.
Another twist to the story-Company’s promoter gave cash to the operators to
buy shares in their names to create the necessary buzz on the stock market.
Efforts paid off, stock has seen a tremendous increase.

19. Suppose a company has to expand its business. So it did its IPO (Initial Public
Offering)
A Pharma company wants Rs 10 lakhs. Its each share is of Rs 100. You bought
10 shares by giving Rs 1000 (10 *100=1000)
The value of share has now became Rs 150 which was Rs 100 earlier. You
need money or you want to sell the share.
Here comes the role of stock market.
In India we have BSE (Bombay Stock Exchange) & NSE ( National Stock
Exchange).
If the demand of the shares are very high, its rate will be high.
If everyone is selling the shares, the rates will fall down.
Many times companies distribute their profits to their shareholders known as
dividend.
You need to research about the company, their past , present & future
performance, sales, revenue, dividend etc. then invest.
Always invest small prices.
Invest only the surplus amount.

20. RAKESH JHUNJHUNWALA

21. THANK-YOU