SEBI pushes for direct plans and trail commissions for AIFs

SEBI recently took certain steps to provide flexibility to investors for investing in AIFs. This is being done to also bring about transparency in expenses. The new provisions shall come into effect for investors onboarded in AIFs from May 1, 2023. 

Direct Plan for AIF Schemes

Going forward, investors will have the option of a ‘Direct Plan’ for all AIF schemes. There will be no distribution or placement fee for such direct plans. Investors who approach the AIF through a SEBI-registered intermediary will be boarded only via the direct plan.

Trail model for distribution commission in AIFs

The regulator has also mandated that AIFs disclose the distribution/ placement fee (if any) to the investors of the AIF scheme at the time of onboarding. It must be noted here that for category I and II AIFs, up to one-third of the total distribution/placement fee to the distributors is paid on an upfront basis while the remaining shall be paid on an equal trail basis. However, for category III AIFs, distribution/placement fees shall be charged only on an equal trail basis over the tenure of the fund.