Speaking to The Financial Express, Sebi's senior executive director OP Gahrotra said, "Out of the four companies, who got registered as deemed FIIs, Munoth Financial Services has got a sub-account registered."

The total number of domestic companies to get registration as foreign institutional investors now stand at four, including Anand Rathi Securities Pvt Ltd, First Global Stock Broking Pvt Ltd, Reliance Capital Asset Management and Munoth Financial and the applications under process are UTI-IAS and Dundee Investment Research Pvt Ltd. According to the Sebi sources, Reliance Capital Asset Management Ltd registration has been the most recent.

FIIs and deemed FIIs are principally the same with the entities subject to the same regulatory and reporting requirements as stipulated in Sebi (foreign institutional investors) Regulations, 1995. "It was to avoid confusion between domestic companies registered as FIIs and other FIIs. For this reason, we have internally started using the term deemed FIIs to refer to domestic companies registered as FIIs, though there has been no legislation to that effect," said Mr Gahrotra The difference is that unlike FIIs, the deemed FIIs cannot invest their own funds. "However, since the funds owned by the deemed FII are managed by their Indian arm, there is a hardly any difference," said a senior official at Sebi.

The management of foreign funds would involve procurement of Fema approval (for convertibility of funds), appointment of a domestic custodian and designated bank, daily reporting of transactions etc. The entities can only manage funds raised abroad by authorised entities/funds and cannot make proprietary investments through this route.

In other words, these entities would have to fulfil the obligations cast on them under the regulations such as appointment of designated bank and custodian, reporting of trades to Sebi and RBI etc, said the release.

Sebi had amended the (foreign institutional investors) Regulation 1995 in February 29, 2000 to permit domestic fund managers to also manage foreign funds. According to Mr Gahrotra, "The idea was to remove the discrimination between the Indian and foreign fund managers by allowing Indian fund managers to also manage foreign funds."