The Securities and Exchange Board of India (SEBI) on April 10, 2023, issued a Circular regarding the Direct plan for schemes of AlFs and a trial model for distribution commission in AIFs
This circular aims to protect the interests of investors in securities and to promote the development and to regulate the securities market
The provisions of this circular shall be complied with for investors on-boarded in AIFs/schemes of AIFs from May 01, 2023
The following has been stated namely: -
• It states that in order to provide flexibility to investors for investing in AIFs, bring transparency in expenses and curb miss-spelling, the following is specified namely: -
A. Direct Plan for schemes of AIFs
i. The Schemes of AIFs shall have an option of ‘Direct Plan’ for investors, such a Direct Plan shall not entail any distribution fee/placement fee.
ii. The AIFs shall ensure that investors who approach the AIF through a SEBI registered intermediary which is separately charging the investor any fee(such as an advisory fee or portfolio management fee), are on-boarded via Direct Plan only.
B. Trail model for distribution commission in AIFs
i. AIFs shall disclose distribution fee/placement fee, if any, to the investors of AIF/scheme of AIF at the time of onboarding.
ii. Category III AIFs shall charge distribution fee/placement fee, if any, to investors only on an equal trial basis i.e. no upfront distribution fee/ placement fee shall be charged by Category III AIFs directly or indirectly to their investors. Further, any distribution fee/ placement fee paid shall be only from the management fee received by the managers of such Category III AIFs
iii. Category I AIFs and Category II AIFs may pay up to one-third of the total distribution fee/placement fee to the distributor’s upfront basis. The remaining distribution fee/placement fee shall be paid to the distributors on one Equal trial basis over the tenure of the fund.
• This circular is available on the SEBI website at www.sebi.gov.in under the categories “Legal framework Circulars" and "Info for -Alternative Investment Funds
[Circular No. SEBI/HO/AFD/PoD/CIR/2023/054]
