The Securities and Exchange Board of India (SEBI) has asked Alternative Investment Funds to offer investors the option of ‘direct plan’ to bring transparency in expenses and curb mis-selling.
The Securities and Exchange Board of India (SEBI) has asked Alternative Investment Funds to offer investors the option of ‘direct plan’ to bring transparency in expenses and curb mis-selling. Apart from this, SEBI has also asked to introduce a phased model for commission distribution and has issued guidelines regarding exit of an investor from investing in AIFs.
The market regulator has issued these guidelines in view of inconsistencies in Private Placement Memorandums (PPMs) and lack of adequate disclosures in respect of certain industry practices. SEBI has said in two separate circulars that the purpose of the new rules is to give flexibility to investors for investing in AIFs, bring transparency in expenses and prevent mis-selling. The framework relating to ‘Direct Plans’ will come into effect from May 1, while the framework relating to exclusion of investors from AIF investments will come into effect immediately.
Directing AIFs, SEBI said, “Schemes of AIFs shall have ‘Direct Plan’ option for investors” and through such direct schemes investors will have an opportunity to participate in AIFs without paying any distribution fee or placement fee . The AIF shall ensure that the investor approaching the AIF through a registered intermediary, who is charging any fee separately from the investor such as advisor fee or portfolio management fee, is on-boarded through Direct Plan only.
