Global Securities Markets: Navigating the World's Exchanges and OTC Markets

FOREIGN EXCHANGE CONTROLS

An exchange control is set by a national government and dictates how much money a resident may take out of his country or hold in a foreign currency. Controls may also limit who and how much may be invested in a country. The approach to exchange controls varies widely among countries. For example, some countries set a specific limit on outgoing money flows. Other countries require reporting of outgoing money and tax unreported money when it is brought back into the country. In a number of countries people may use securities transactions to avoid exchange controls and thus transfer money outside of the controls and established exchange rates. These controls are antithetical to global free trade ideals but, it must be noted, that in some countries such as India, for example, the strict exchange controls allowed it to weather the economic turmoil in 2008 quite nicely because India was little affected by the collapse in Western markets.1