The capital markets regulator Sebi (Securities Exchange Board of India) told alternative investment funds (AIFs) to launch direct plan for investors. Such direct plan will not entertain any distribution fee/placement fee, reads the circular issued by the capital markets regulator.
The AIFs shall ensure that investors who approach the AIF through a SEBI registered intermediary which is separately charging the investor any fee are on-boarded via direct plan only, reads the SEBI circular.
SEBI has introduced this to give flexibility to investors for investing in AIFs, bring transparency in expenses and curb mis-selling.
The SEBI circular dated April 10 also clarifies that AIFs will disclose distribution fee/ placement fee, if any, to the investors of AIF/ scheme of AIF at the time of on-boarding.
Category III AIFs will charge distribution fee/ placement fee to investors only on equal trail basis i.e., no upfront distribution fee will be charged by the AIFs directly or indirectly to their investors.
However, category I AIFs and category II AIFs may pay upto one-third of the total distribution fee/placement fee to the distributors on equal trail basis over the tenure of the fund.
These provisions will be complied with for investors on-boarded in AIFs/ schemes of AIFs from May 1 onwards.