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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Fund Distribution and Channel Management Practices

Under the SEBI framework, which of the following is the correct description of a 'Direct Plan' of a mutual fund scheme?

A Direct Plan is a scheme option in which the expense ratio does not include distribution commission or distributor expenses. Investors buy directly from the AMC, so the plan usually has a lower expense ratio and a higher NAV than the Regular Plan of the same scheme.

  1. AA plan with no distribution commission or distributor-related expenses included in its expense ratioCorrect
  2. BA plan available only to institutional investors
  3. CA plan that invests directly in equity shares without a fund manager
  4. DA plan where the distributor charges a fee that is added to the NAV

Explanation

A Direct Plan is meant for investors who invest without routing through a distributor, so its expense ratio carries no commission or distribution cost. It is open to all investors, not only institutions, and it is still managed by the fund manager. Hence the first option is correct.

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