X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
FEMA - Will it heal the wounds of FERA? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jul 15, 2000

    FEMA - Will it heal the wounds of FERA?

    Replacement of FERA by FEMA…
    The replacement of FERA (Foreign Exchange Regulation Act) by FEMA (Foreign Exchange Management Act) reflects a paradigm shift in the attitude and the perception from that of restriction and regulation, including the mistrust and doubting every transaction as being violation of the foreign Exchange laws to that of management of foreign Exchange.

    FERA was enacted at the time when foreign exchange was scarce and was perceived to be a rare commodity and hence required constant monitoring and regulation. This shift has been on account of global liberalization and on account of free and more secure trade. The draconian provisions of the FERA (of being continuously hauled up before the Enforcement Directorate and being put behind bars for the smallest of crimes) have been done away with.

    FEMA has been set up to consolidate and amend the law relating to foreign exchange, with the objective of facilitating foreign external trade and payments for promoting the orderly development and maintenance of foreign exchange.

    Yet similarities do exist…
    Between FERA and FEMA to the extent that they continue to be governed by the Reserve Bank of India and the Central Govt. as the Regulatory Bodies. The Directorate of Enforcement continues to be the agency for Enforcement of the provisions of Search and Seizure. The presumption of Extra -Territorial Jurisdiction as envisaged by FERA has been retained.

    But the differences outweigh…
    The exclusion of the presumption of Mens Rea (guilty mind) and abetment (encouragement to commit a crime) in FEMA, represent a material shift in perception of the Authorities in their handling of Forex violations.

    On account of the Globalization of the Economy, and with the impending Convertibility on the Capital Account - what constitutes a 'Capital Account Transaction' and 'Current Account Transaction' among others have been clearly defined.

    The concept of an "Authorized person" to deal in Foreign Exchange has been widened under FEMA to include an Authorized Dealer, Money Changer, or an offshore banking unit or any person authorized to deal in Forex and Foreign Securities.

    FERA also suffered from lack in uniformity and harmony, with other Laws. Under FERA - the concept of a "Resident " was distinct and separate to that under the Income Tax Act, and hence this was remedied by FEMA.

    The most significant difference however was in the nature and perception of Offences- whilst under FERA every offence was a Criminal Offence - punishable with imprisonment; under FEMA the offences are Civil Offences and punishable with a monetary penalties only.

    The most Draconian Provision under FERA of arrest and detention by the Enforcement Directorate of any person suspected of or even alleged to have committed an offence punishable under the act has been considerably curtailed to take effect only when one fails to pay the monetary penalty. Under the new FEMA, even the quantum of the monetary penalty has been curtailed from five times the amount involved to three times the value of the transaction. The sweeping powers of search and seizure granted to a police officer, under FERA have been curtailed and restricted.

    The right of an impleaded person to seek assistance in the form of a legal counsel or a Chartered Accountant has been recognized and granted under the FEMA.

    FEMA represents the changing reality of the era of globalization to which the authorities have finally woken up to.

     

     

    Equitymaster requests your view! Post a comment on "FEMA - Will it heal the wounds of FERA?". Click here!

      
     

    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARKET STATS