AIF: Sebi asks AIF to provide option of direct plans

Mumbai: The Securities and Exchange Board of India (Sebi) on Monday asked Alternative Investment Funds(AIFs) to provide the option of direct plans for its investors. Through such plans, investors can participate in an AIF without having to pay any distribution fee or placement fee. AIFs are funds that cater to wealthy individuals willing to invest more than ₹1 crore in a single go.

The regulator has also asked the AIFs to disclose distribution fees to the investors while on-boarding them.

Also, for category III AIFs, which invest in listed securities, the distribution fee needs to be charged on a trail basis. These measures have been brought in to enhance the transparency and curb misselling, Sebi circular added.

“Category III AIFs shall charge distribution fee/ placement fee, if any, to investors only on equal trail basis i.e. no upfront distribution fee/ placement fee shall be charged by Category III AIFs directly or indirectly to their investors,” said the Sebi circular.

In case of category I&II AIFs, Sebi said, up to one third of the total distribution fee may be paid to distributors upfront basis while remaining shall be paid on trail basis.