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India introduces new rules governing alternative investment funds

The new rules govern fees charged by alternative investment funds.
Taj Mahal in sunrise light, Agra, India

India’s market regulator the Securities and Exchange Board of India (SEBI) has introduced sweeping new rules governing the fees charged by alternative investment funds.

Under a circular issued earlier this week, alternative investment funds will be forced to provide direct plan options to investors, which will involve no distribution fee or placement fee.

Furthermore, these types of funds will ensure that investors who approach through a registered intermediary, which separately charges the investor any fee, are onboarded through the direct plan only.

SEBI also asked alternative investment funds to disclose distribution fees, if any, to the investors of their schemes at the time of onboarding.

Finally, category III alternative funds, in other words, hedge funds, will be prevented from charging upfront distribution fees or placement fees.

The new regulations come into effect on 1 May.

Alternative investment funds typically cater to high-net-worth individuals willing to invest Rs10m ($122,000) in one trade.

Part of the Mark Allen Group.