Specifications pertaining to direct plan for schemes of AIFs and trail model for distribution commission in AIFs

Securities Exchange Board of India (“SEBI”) vide its Circular No.: SEBI/HO/AFD/POD/CIR/2023/054 dated Apr 10, 2023 has put forth certain specifications pertaining to the direct plan for schemes of Alternative Investment Funds (“AIFs”) and the fees that may be charged by AIF / schemes of AIF including distribution fees and placement fees.
1. Direct Plan for schemes of AIFs:
a. Schemes of AIFs shall include an option of direct plan for investors which shall not consist of any distribution fee or placement fee.
b. Investors who approach the AIF through a SEBI registered intermediary which is separately charging the investor any fees shall be onboarded through a direct plan only.
2. Trail model for distribution commission in AIFs
a. AIFs shall disclose any distribution fee/ placement fee to be charged to the investor at the time of onboarding itself.
b. Category III AIFs shall charge distribution fee/ placement fee, if any, only on equal trail basis which means that no upfront distribution fee/ placement fee shall be charged by them to the investors.
Provided that such fee shall be paid only from the management fee received by the managers of such AIF.
c. Category I AIFs and Category II AIFs may pay upto one-third of the total distribution fee/placement fee to the distributors on upfront basis, and the remaining distribution fee/placement fee shall be paid to the distributors on equal trail basis over the tenure of the fund.
The aforesaid provisions shall be complied with for investors on-boarded in AIFs/schemes of AIFs from May 1, 2023 onwards.


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