Market watchdog to brush up art fund regulations

The Securities and Exchange Board of India is looking at introducing a slew of modifications in its prescribed regulations for art funds. It may consider art funds on a case-to-case basis without mandating a blanket approval for all funds.

In February, Sebi had called for registration of art funds as they function as collective investment schemes. “According to Section 12 (1B) of the Sebi Act, no person shall sponsor or cause to be sponsored or cause to be carried on a collective investment scheme unless he obtains a certificate of registration from Sebi”, said the circular.

Sebi has issued notices to Yatra, Osian’s and Crayon’s art funds for failing to comply with registration requirements. Some of these funds responded by citing their establishment as private trusts for the benefit of select and identifiable groups and not for raising money from the general public. The regulator is expected to announce its verdict on the issue soon.

Art funds have lately caught Sebi’s attention because of their style of functioning. These funds do not disclose their portfolios, NAVs or returns. In such a scenario, the regulator is trying to cap fly-by-night operators.

“Sebi has ignored the fact that some of these art funds are private trusts which offer invitations to a group of individuals interested in the asset class. It will have to find a middle way for bringing art funds under its purview”, said a lawyer at a leading law company associated with one of the appellants.

The global art market has been going through volatile times, prompting some prominent art funds to postpone their launches. The organised art market in the country is valued at Rs 800 crore a year and is growing at over 30 per cent annually, according to experts. Banks such as ABN Amro, Yes Bank and ICICI Bank offer art advisory, whereby HNIs are assisted in selecting and purchasing art works.